Upload
others
View
3
Download
0
Embed Size (px)
Citation preview
Cataylzing Inclusion: Financial Technology & the Underserved
CATAYLZING INCLUSION: FINANCIAL TECHNOLOGY & THE UNDERSERVED
Lucy Gorham & Jess Dorrance
AUGUST 2017
UNC Center for Community Capital
TITLE
3Cataylzing Inclusion: Financial Technology & the Underserved
AC
KN
OW
LE
DG
ME
NT
SThe Center for Community Capital thanks JPMorgan Chase &
Co. for their generous support of this research. Additionally, the
authors wish to thank everyone who so generously offered their
time and perspectives during the course of our interviews for this
report. We would also like to thank Sonia Garrison, Erika Brandt,
Ashley Tucker, and Jennifer Rangel for their research contributions
and Julia Barnard, Eileen Harvey, and Audrie Lathrop for their
editorial and graphic design assistance.
The views and opinions expressed in this report are those of the
Center for Community Capital and do not necessarily reflect the
views and opinions of JPMorgan Chase & Co. or its affiliates.
The Center for Community Capital is a non-partisan, multi-disciplinary
research center housed within the University of North Carolina at Chapel
Hill, and is a leading center for research and policy analysis on the power
of financial capital to transform households and communities in the
United States. It is part of the University of North Carolina at Chapel
Hill’s College of Arts and Sciences.
The center’s in-depth analyses help policymakers, advocates, and the
private sector find sustainable ways to expand economic opportunity to
more people, more effectively.
ROBERTO G. QUERCIA
DIRECTOR
LUCY S. GORHAM
EXECUTIVE DIRECTOR
UNC Center for Community Capital
TABLE OF CONTENTS
07 EXECUTIVE SUMMARY
13 OVERVIEW
18 THE EMERGENCE of Fintech in Consumer Financial
Services in a Global Context
24 THE POTENTIAL for Consumer-Facing Digital
Technology to Expand Financial Inclusion
and Capabil ity for Underserved Consumers
24 Profiles of the Unbanked and Underbanked
25 The Reasons Consumers Give for Being
Unbanked or Underbanked
26 What Underserved Consumers Want
From Financial Services Providers
30 Consumer Access To and Use Of Digital
Financial Services
35 The Potential Advantages of Mobile
Financial Services for the Underserved
40 Barriers Impacting the Adoption of Fintech
5
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
44 FIVE KEY INVESTMENTS Needed to Real ize the
Potential of Digital Financial Services to
Increase Financial Inclusion
44 Expand Research and Investment on Fintech
for the Underserved
48 Build Nonprofit Capacity
60 Increase Access to Broadband and
Mobile Technology
60 A Balanced Regulatory Landscape that
Protects Consumers and Supports
Innovation
61 Modernization & Increased Security
63 CONCLUSION
64 REFERENCES
UNC Center for Community Capital
TITLE
7Cataylzing Inclusion: Financial Technology & the Underserved
EX
EC
UT
IVE
SU
MM
AR
Y
THE PROLIFERATION of technology innovations from both incumbent, or established, financial
services providers and new entrants to the industry have enormous potential to expand financial health
and inclusion. This important opportunity can lower costs, improve transparency and convenience,
and give low- and moderate-income (LMI) consumers greater control over their finances. However,
progress towards these goals is not inevitable. Public, private, and nonprofit sector actors will need to
collaborate in order to prioritize inclusive development within the financial services sector.
This paper explores the potential for technology innovation in the financial services sector – fintech
– to increase the financial well-being and inclusion of American households and communities. By
synthesizing research from every corner of the field and establishing an overview of low- and
moderate-income consumer needs, this paper identifies both the barriers and the opportunities facing
fintech providers.
Unlike many parts of the globe where consumer banking
is just emerging, the United States possesses a mature
banking infrastructure accessible to most, though not
all, consumers and geographies.1 Despite the widespread
presence of consumer financial services providers and
products, however, a large share of American consumers
remain underserved. According to the Center for Financial
Services Innovation (CFSI), the underserved include 91
million consumers with low-to-moderate incomes, 51
million struggling with volatile incomes, 121 million who are credit-challenged, and 67 million who are
unbanked or underbanked.2 Beyond the financially underserved, CFSI also estimates that approximately
57 percent of Americans – 137 million consumers – are financially unhealthy, meaning they struggle to
manage their day-to-day finances, establish a savings cushion, and take steps to ensure their financial
security and mobility.3
The United States also stands out when compared with other advanced economies in the share of
the bottom 40 percent of households with a bank account compared with the remaining 60 percent.
According to the World Bank: “In Canada, France, Germany, Japan, and the United Kingdom there is no
significant difference in account penetration between adults in the poorest 40 percent of households
and those in the richest 60 percent – and the share of adults with an account exceeds 95 percent in the
poorer group. In the United States, by contrast, the data show a gap of 11 percentage points in account
penetration between the two groups, with only 87 percent of adults in the poorer group having an
account.”4
1 See, for example: Friedline, Terri, Mathieu Despard, and Stacia West. “Navigating day-to-day finances: A geographic investigation of
brick-and-mortar financial services and households’ financial health.” Lawrence, KS: University of Kansas Center on Assets, Education &
Inclusion (AEDI). 2017; Morgan, Donald, Maxim Pinkovskiy, and Bryan Yang. “Banking Deserts, Branch Closings, and Soft Information.”
Liberty Street Economics, Federal Reserve Bank of New York. March 7, 2016.2 The FDIC reports that according to their 2015 survey, 7 percent of all U.S. households – approximately 9 million households with 16.5
million adults – lack a checking or savings account (the unbanked). An additional 19.9 percent of households – approximately 24.5 mil-
lion households with 51 million adults – rely on non-bank providers of financial services, even though they possess a bank account (the
underbanked) See: FDIC. “2015 FDIC National Survey of Unbanked and Underbanked Households .” October, 2016. P.13.3 Gutman, Aliza., Thea Garon, Jeanne Hogarth, and Rachel Schneider. “Understanding and Improving Consumer Financial Health in
America.” CFSI. 2015. Accessed on-line: https://s3.amazonaws.com/cfsi-innovation-files/wp-content/uploads/2017/01/24183123/Under-
standing-and-Improving-Consumer-Financial-Health-in-America.pdf4 Demirgüc-Kunt., Asli., and Leora Klapper, Dorothe Singer, and Peter Van Oudheusden. “The Global Findex Database 2014 – Measuring
Financial Inclusion around the World.” World Bank Policy Research Working Paper 7255. World Bank Group. April 2015.
THE PROLIFERATION OF FINTECH
INNOVATIONS FROM BOTH
INCUMBENT FINANCIAL SERVICES
PROVIDERS AND NEW ENTRANTS
TO THE INDUSTRY HAVE THE
POTENTIAL TO EXPAND FINANCIAL
HEALTH AND INCLUSION.
EXECUTIVE SUMMARY
Financially underserved households often pay a high
price for the financial services they do use. According
to the Center for Financial Services Innovation (CFSI),
“Financially underserved consumers in the U.S. spent
approximately $141 billion in fees and interest during
2015 to borrow, spend, save, and plan across 28 financial
products in this diverse and continually growing
marketplace.”5 These costs in fees and interest paid by
the underserved undermine their financial stability and
that of the communities in which they reside. On the flip
side, these costs paid by underserved consumers may
represent a significant untapped market for financial
services providers – traditional and non-traditional, for-
profit and nonprofit – that can better meet the financial
management needs of the underserved and those
working to improve their financial health.
There is one promising global trend that may assist
financial services providers in expanding financial
inclusion: fintech – the use of innovative technology
driving consumers and businesses towards digital
platforms such as online and mobile banking. Globally,
the investment going to private fintech companies
increased ten-fold between 2010 and 2015, increasing
from $1.8 billion to $12 billion.6 By far, the lion’s share
of these investment dollars – 73 percent –went to firms
and products targeting both the personal and small-to-
medium enterprise (SME) sectors.7
The focus on fintech aimed at personal finance or
business to consumer (B2C) services reflects two
factors. The first is that business systems and practices
can take longer to migrate to new opportunities than
individual households who may find improvements in
their customer experience, a lower price, or access to a
product or service that was not previously available. The
second is that, on the provider side, fintech innovators
can offer products and services that sit atop existing
financial services platforms, thus taking advantage of
available infrastructure without having to bear the cost
of duplication. For example, a fintech app from a non-
bank provider that links to an existing bank account
effectively takes advantage of both the brick-and-mortar
infrastructure embodied by the home bank’s branches
and account safeguards such as customer identification
regulations that the home bank must meet.
While the fast pace of change in the financial services
landscape requires regulators to update their oversight
of non-bank providers of financial services, currently
innovators are able to take advantage of this opening
and benefit from the cost savings.
On the consumer side, fintech has the potential
to expand access to safe and affordable financial
services to more people. The advantages of these
innovations include lower costs for services driven by
greater efficiencies and targeted marketing, improved
transparency about product and service terms and
costs, greater financial control, faster and/or real-time
deposits and expenses reflected in account balances,
new products and services specifically aimed at the
underserved, and improved safety and security of funds.
All of these fintech advantages have great potential
and already benefit many consumers, including those
who are currently underserved. Nevertheless, in the
United States, the share of the consumer “banking
wallet” migrating to digital channels for all consumers,
not just the underserved, is still estimated to be small – 1
percent in 2016.8 However, analysts expect that share
of the consumer banking wallet to grow rapidly to 10
percent by 2020.9 Already in 2016, 71 percent of account
holders reported using online banking, while 38 percent
reported using mobile financial services.10
With the development and adoption of fintech at
a flexion point, it is unclear whether fintech will
fundamentally alter the financial inclusion landscape in
the United States. One possibility is that a combination
of weaker consumer regulations and a push towards
innovation directed at the middle and higher ends
of the market to underwrite the investment costs
of implementing digital services will result in an
increasingly complex and confusing array of products
5 CFSI. “2016 Financially Underserved Market Size Study.” December 21, 2016. Accessed online: http://cfsinnovation.org/research/2016-financially-under-
served-market-size-study/6 Citi GPS: Global Perspectives and Solutions. “Digital Disruption: How FinTech is Forcing Banking to a Tipping Point.” March 2016. P 4. Accessed online June
2016: https://ir.citi.com/puIjT9V0Vo%2bvpc9RL2PEr26kiSGlvSxjFfLIK3Kum38daQckaOKRnVTtYIcAjRgiOrPWjfIasEQGQFyo8Fn5CQ%3d%3d 7 Ibid. 8 Ibid.9 Ibid.10 Board of Governors of the Federal Reserve System. “Consumers and Mobile Financial Services 2016.” March 2016. Box 2. “Banking Status and the Use of Mobile
Banking and Payments – continued.” Figure A. Phone ownership by banking status and Figure B. Mobile banking and payments use by banking status. Page 11.
9
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
and services, some of which the underserved will find
helpful but many of which they may find challenging to
navigate safely. If so, we will squander the opportunity
for fintech to play a catalytic role in expanding financial
health and inclusion.
But another possibility is that new collaborations
among a diverse array of partners – incumbent financial
institutions, fintech innovators, nonprofits, and the
public sector – can transform the financial services
landscape and allow fintech to emerge as a true catalyst
for meaningful improvements in financial inclusion. We
highlight several such collaborations in this report. To
accomplish this transformation, we argue that private,
public, and philanthropic investments are needed in five
key areas:
Expanded research and investment in fintech
innovation targeted specifically to the needs of
the underserved and those wanting to improve
their financial health;
Greater investment in the capacity of those parts
of the non-profit and public sectors that are
working directly with the underserved to link them
to appropriate financial products and services, to
increase their digital literacy, and to improve their
financial health;
Greater access of the underserved to reliable and
affordable digital technology, including universal
broadband and mobile technology;
An updated regulatory landscape that both
protects consumers and allows for controlled
experimentation; and
Improvements to the banking system, specifically
a) modernization that allows faster payments and
posting of deposits; and b) universal adoption
of enhanced security to address widespread
consumer concerns about the safety of digital
financial services and provider concerns about
fraud and increased levels of risk.
We believe that significant investments in these five
areas could help to build a financial ecosystem that
better meets the needs of the underserved, as well as
assist those struggling to reach or maintain financial
health. However, it would be naive to think that an
improved financial services landscape, in and of itself,
can turn the tide for many households who must
deal with increasingly volatile incomes, inadequate
and stagnating wages, declining access to workplace
benefits such as retirement, sick leave, and healthcare,
and a fraying social safety net. We cannot ignore
the broader context of what needs to be achieved
to enable American households to avoid financial
instability, undermining their prosperity and that of their
communities.
This report examines the potential of fintech to increase
financial inclusion. High-level findings are presented
in the areas of fintech investment trends, fintech
adoption trends, American fintech adoption in a global
perspective, consumer views of the evolving financial
services landscape, barriers to fintech adoption, and the
potential of fintech and nonprofit partnerships.
FINTECH INVESTMENT TRENDS
Rather than fintech companies creating
wholesale disruption, industry experts expect
that partnerships between fintech innovators and
incumbent financial institutions will dominate
the future of the industry; nevertheless, fintech
companies will change the ways that financial
institutions do business in both the short- and
long-term.
Many incumbent financial institutions have
reduced their branch banking infrastructure in
some areas of the country, but in others have
actually expanded branches as a customer
acquisition strategy, particularly in wealthier cities.
Globally, the investment going to private fintech
companies increased ten-fold between 2010 and
2015, increasing from $1.8 billion to $12 billion.
1
2
5
4
3
UNC Center for Community Capital
FINTECH ADOPTION TRENDS
Adoption of digital financial services has been
fastest among consumers who are digitally-savvy,
young, urban, and better-educated. Gender
differences appear to be minimal, though this is an
area that deserves further research.
A growing share of consumers now access their
financial information through mobile technology,
and a growing share of consumers use mobile
phones as their primary or sole means to access
the internet.
Despite an accelerated move to digital financial
services, consumers still want to be able to access
their financial institutions in multiple ways and
across multiple platforms, including meeting with
someone in person to address problems or receive
advice.
AMERICAN FINTECH ADOPTION IN A GLOBAL PERSPECTIVE
In terms of overall consumer adoption of mobile
and online financial services, the United States is in
the middle of the pack when complared with parts
of Asia, Europe, and Africa.
In some parts of Europe, particularly in Sweden,
the adoption of digital banking has been spurred
by significant, long-term public investments in
broad-band technology and consumer access to
affordable computing technology. India provides
another example of this public-sector investment
strategy in an emerging financial services system.
Many view an accommodating regulatory system
in the U.K. as a key factor in spurring innovation
among its fintech firms and a model that other
countries should consider for adoption, including
the United States.
The U.S. fintech industry holds advantages in
access to talent, capital, and consumer demand
when compared to other parts of the globe.
CONSUMER VIEWS ON THE EVOLVING FINANCIAL SERVICES LANDSCAPE
Consumers perceive incumbent financial
institutions, fintech companies, and non-profit
intermediaries as each possessing advantages
and disadvantages in meeting the needs of
underserved consumers and each having an
important role to play in scaling up financial
inclusion. Each category of institutions has much
to gain from collaboration.
Consumers feel that non-bank fintech providers
have an edge in the following areas:
o Speed and ease of account opening
o Convenience
o Faster access to account information
o Affordability
o Fewer fees or no fees, greater transparency
o Innovative consumer interfaces
Consumers feel that traditional financial services
providers have an edge in the following areas:
o Security of account information and funds
o Ability to receive one-on-one support
o In-person account opening
o Variety of products available
Consumers feel that nonprofit financial services
providers have an edge in the following areas:
o Higher trust-factor
o Ability to receive one-on-one support
o Ability to combine financial services with
other programs, such as affordable housing
or workplace services
EXECUTIVE SUMMARY
11
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
BARRIERS TO FINTECH ADOPTION
Distrust of digital channels is fading, but
concerns related to the security of personal
information persist and some consumers,
especially non-English speakers and immigrants,
remain suspicious of products and tools not
offered through familiar financial institutions,
organizations, or trusted intermediaries.
A lack of knowledge about a growing and
complex landscape of available options can leave
consumers feeling paralyzed about using any of
them without in-person assistance to pick and
choose something that will meet their needs.
The lack of a guided onboarding process can
negatively impact take-up when consumers face
uncertainty at any point during the enrollment
process.
Issues related to data plans on mobile devices and
reliable internet access create hurdles for some
LMI consumers that limit their ability to take full
advantage of some fintech products and tools.
Consistent demand for cash drives consumers to
utilize options like check cashers where they can
get access to their paychecks immediately.
Many fintech products are not adequately
designed for people with disabilities, meaning that
those with visual or other impairments are often
unable to use these tools.
Many consumers are comfortable with their
current banking habits and do not perceive
enough advantages of digital financial services to
add or switch to them.
THE POTENTIAL OF FINTECH AND NONPROFIT PARTNERSHIPS
Intermediary institutions, such as nonprofits and
community-based organizations, can serve as
conduits for fintech companies to reach out to and
learn from LMI consumers while enhancing their
own ability to serve their clients’ needs.
The full potential of these partnerships requires
further exploration, and there may be types of
organizations where the opportunity for making
a mutually beneficial match between fintechs and
nonprofits can best be maximized.
For nonprofits interested in designing and piloting
their own fintech products and services, it is
important to examine whether they have adequate
resources and technical knowledge to implement
their own fintech tool.
While nonprofit organizations are increasingly
incorporating fintech tools into their work with
clients, those same clients consistently cite the
need to talk with someone one-on-one as a major
factor in their ability to improve their financial
health. Thus, the use of fintech tools must be
paired with a larger public commitment to
investing in household financial health through a
robust nonprofit infrastructure to fill the gaps left
by for-profit providers. This commitment should
also provide funding for nonprofits to develop and
test fintech products and services themselves.
Non-profit organizations often have deep
knowledge of the needs of the LMI groups they
serve and can often reach into target communities,
but they often lack the technical expertise needed
to evaluate fintech options and to stay current
with products and services as they evolve.
For many nonprofit financial services providers,
including credit unions, Community Development
Finance Institutions (CDFIs), and community-
based organizations, resources to upgrade or
replace existing legacy systems are inadequate to
fully scale the incorporation of fintech into their
services.
UNC Center for Community Capital
CONCLUSION
The growth of fintech and the increasing adoption of digital financial services by consumers introduces new
opportunities to increase access to financial services. However, a significant expansion of financial inclusion is
not an inevitable outcome of these trends. Making fintech a true catalyst for change requires new and significant
investments and commitment from a broad range of private, philanthropic, non-profit, public, and regulatory
institutions and actors across the financial services ecosystem.
This report outlines areas of needed investment that, collectively, would open up greater access to and use of
digital financial services for the financially underserved. These investments would also create new opportunities
for the underserved to articulate their own needs and be involved in designing appropriate innovations in
response. Even more, they could address the concerns of both providers and consumers related to system speed
and security, ensure adequate consumer protection, and increase the capacity of a range of nonprofit and other
intermediary institutions that are key partners in providing the underserved with the high-quality and affordable
products and tools they need to maintain or improve their financial health.
This report also profiles a variety of promising initiatives that illustrate the sort of innovative cross-sector
collaborations needed to reach the underserved in new ways. Currently, the scale of such initiatives remains
inadequate compared to the need. This is, in part, because these initiatives are still emerging but, more
fundamentally, it is because they require greater resources and further integration into major private and
public systems and institutions. Fortunately, critical players across the financial services landscape are already
articulating the required expertise and vision.
Our hope is that what many describe as the “fintech revolution” will provide the basis for a deeper revolution in
financial inclusion and health that so many families and communities desperately need.
EXECUTIVE SUMMARY
13Cataylzing Inclusion: Financial Technology & the Underserved
OV
ER
VIE
WTHIS PAPER EXPLORES the potential for technology innovation in the financial services sector – fintech
– to increase the financial well-being and inclusion of American households and communities. By
financial well-being, we refer to the four dimensions of well-being defined by consumers: possessing
control over ongoing finances, having the ability to cope with a financial shock, setting and being on
track to achieve financial goals, and having a sense of financial freedom rather than being consumed
with financial worry.11 By financial inclusion, we mean the expanded ability of those underserved by
current banking services to access financial services that are high quality, fairly priced, and assist them
to maintain or improve their financial health. Among the underserved, we include those who struggle
to access mainstream financial services due to low incomes and income volatility, those with limited or
no access to credit due to thin-or-no credit files, and those who are unbanked or underbanked.12, 13
Unlike many parts of the globe where consumer banking is just emerging, the United States possesses
a mature banking infrastructure accessible in most, though not all, geographies.14 Despite the
widespread presence of consumer financial services providers and products, a large share of American
consumers remain underserved. According to the Center for Financial Services Innovation (CFSI),
the underserved include 91 million consumers with low-to-moderate incomes, 51 million struggling
with volatile incomes, 121 million who are credit-challenged, and 67 million who are unbanked or
underbanked.15 Looking beyond the financially underserved, CFSI also estimates that approximately 57
percent of Americans – 137 million consumers – are financially unhealthy, meaning that they struggle to
manage their day-to-day finances, establish a savings cushion, and take steps to ensure their financial
security and mobility.16
The United States also stands out when compared with other advanced economies in the share of
the bottom 40 percent of households with a bank account compared with the remaining 60 percent.
According to the World Bank, “In Canada, France, Germany, Japan, and the United Kingdom there is no
significant difference in account penetration between adults in the poorest 40 percent of households
and those in the richest 60 percent – and the share of adults with an account exceeds 95 percent in the
poorer group. In the United States, by contrast, the data show a gap of 11 percentage points in account
penetration between the two groups, with only 87 percent of adults in the poorer group having an
account.”17
Financially underserved households pay a high price for the financial services they do use. According to
the Center for Financial Services Innovation:
Financially underserved consumers in the U.S. spent approximately $141 billion in fees and interest during 2015 to borrow, spend, save, and plan across 28 financial products in this diverse and continually growing marketplace.”18
11 United States Consumer Financial Protection Bureau. “Financial Well-Being: The Goal of Financial Education.” January, 2015. P. 5.12 Schmall, Theresa., and Eva Wolkowitz. “2016 Financially Underserved Market Size Study.” CFSI. November 2016.13 The FDIC reports that according to their 2015 survey, 7 percent of all U.S. households – approximately 9 million households with 16.5
million adults – lack a checking or savings account (the unbanked). An additional 19.9 percent of households – approximately 24.5 million
households with 51 million adults – rely on non-bank providers of financial services, even though they possess a bank account (the under-
banked) See: Federal Deposit Insurance Corporation. “National Survey of Unbanked and Underbanked Households 2015.” FDIC. October 20,
2016. P. 13.14 See, for example: Friedline, Terri., Mathieu Despard, and Stacia West. “Navigating day-to-day finances: A geographic Investigation of
brick-and-mortar financial services and households’ financial health.” Lawrence, KS: University of Kansas, Center on Assets, Education, & In-
clusion (AEDI).; and Morgan, Donald., Maxim Pinkovskiy, and Bryan Yang. “Banking Deserts, Branch Closings, and Soft Information.” Liberty
Street Economics, Federal Reserve Bank of New York. March 7, 2016. 15 Gutman, Aliza., Thea Garon, Jeanne Hogarth, and Rachel Schneider. “Understanding and Improving Consumer Financial Health in Amer-
ica.” CFSI. 2015. Accessed on-line: https://s3.amazonaws.com/cfsi-innovation-files/wp-content/uploads/2017/01/24183123/Understand-
ing-and-Improving-Consumer-Financial-Health-in-America.pdf16 Ibid.17 Demirgüc-Kunt., Asli., and Leora Klapper, Dorothe Singer, and Peter Van Oudheusden. “The Global Findex Database 2014 – Measuring
Financial Inclusion around the World.” World Bank Policy Research Working Paper 7255. World Bank Group. April 2015. 18 CFSI. “2016 Financially Underserved Market Size Study.” December 21, 2016. Accessed online: http://cfsinnovation.org/research/2016-fi-
nancially-underserved-market-size-study/
OVERVIEW
These costs in fees and interest paid by the underserved
undermine their financial stability and that of the
communities in which they reside. On the flip side, these
costs paid by underserved consumers may represent
a significant untapped market for financial services
providers – traditional and non-traditional, for-profit
and nonprofit – that can better meet the financial
management needs of the underserved.
One global trend that may assist financial services
providers to expand financial inclusion is the revolution
underway in the way that consumers access, save,
spend and invest their money with fintech. Whether
consumers are checking account balances on a mobile
phone or paying for purchases on-line using one of
the growing number of payment options (e.g. PayPal,
ApplePay, AndroidPay), fintech innovations are changing
the customer experience in ways that many contend are
already disrupting the financial services industry, with
many more changes expected and at an accelerating
pace over the next decade.
Globally, the investment going to private fintech
companies increased ten-fold between 2010 and 2015,
increasing from $1.8 billion to $12 billion.19 By far, the
lion’s share of these investment dollars – 73% – went
to firms and products targeting both the personal and
small-to-medium enterprise (SME) sectors.20 These
sectors garner the largest share of profits in the banking
system – 46% for personal/SME compared with 35% for
corporate banking and 19% for investment banking.21
The focus on fintech aimed at personal finance or
business to consumer (B2C) services reflects two
primary factors. The first is that, unlike business systems
and practices which can take longer to migrate to
new opportunities, consumers are often willing to try
something new, especially if it improves their customer
experience, comes at a lower price, or gives them a
product or service that wasn’t previously available. A
second is that, on the provider side, fintech innovators
can offer products and services that sit atop exisiting
financial services platforms, thus taking advantage of
available infrastructure without having to bear the cost
of duplication.
19 Citi GPS: Global Perspectives and Solutions. “Digital Disruption: How FinTech is Forcing Banking to a Tipping Point.” March 2016. P 4. Accessed online: https://
ir.citi.com/puIjT9V0Vo%2bvpc9RL2PEr26kiSGlvSxjFfLIK3Kum38daQckaOKRnVTtYIcAjRgiOrPWjfIasEQGQFyo8Fn5CQ%3d%3d20 Ibid. 21 Ibid.22 The New York Times. “Ranking the Top Fintech Companies.” March 6, 2016. Accessed online: https://www.nytimes.com/interactive/2016/04/07/business/deal-
book/The-Fintech-Power-Grab.html?_r=023 Arsene, Codrin. “10 Fintech Companies Giving Banks a Run for their Money.” Y Insights March 16, 2017. Accessed on-line: https://ymedialabs.com/top-10-fin-
tech-companies/
For example, a fintech app from a non-bank provider
that links to an existing bank account effectively takes
advantage of both the brick-and-mortar infrastructure
embodied by the home bank’s branches and account
safeguards such as customer identification regulations
that the home bank must meet. While some argue that
additional regulatory oversight is needed for non-bank
providers of financial services equivalent to those faced
by incumbent financial institutions, innovators are
currently able to take advantage of that opening in the
financial services landscape and to benefit from the cost
savings.
THE POTENTIAL
Fintech innovations present an exciting opportunity to
expand financial health and inclusion. The advantages
of these innovations include lower costs for services
driven by greater efficiencies and targeted marketing,
improved transparency about product and services
terms and costs, greater financial control, faster and/
or real-time deposits and expenses reflected in account
balances, new products and services specifically aimed
at the underserved, and improved safety and security
of funds. All of these fintech advantages have great
potential and already benefit many consumers, including
those who are currently underserved.
As just one example, Credit Karma, which allows its
members to access their credit report for free and
thus gives consumers an important tool to gain greater
control over their financial health, is ranked the number
one valued company in the personal finance and
investment management sector and was recently listed
as one of “10 Fintech Companies Giving Banks a Run for
their Money.”22, 23 Started in 2007, Credit Karma currently
has 60 million members and will shortly provide a
means for its members to file their U.S. income taxes
for free. Later in the report, we discuss the many ways
that fintech innovation provides new opportunities
for financial inclusion along with examples of how
innovators are addressing the specific needs of the
underserved. And many, like Credit Karma, are already
achieving scale.
15Cataylzing Inclusion: Financial Technology & the Underserved
THE CHALLENGE
Although there is enormous potential for fintech
innovation to serve LMI consumers, there are also
challenges that must be overcome.
In the United States, the share of the consumer “banking
wallet” disrupted by digital channels for all consumers,
not just the underserved, is still estimated to be small
– 1% in 2016.24 However, analysts expect that share of
the consumer banking wallet to grow rapidly to 10%
by 2020.25 With the development of fintech at a flexion
point, it’s unclear whether fintech will fundamentally
alter the financial inclusion landscape in the U.S. One
possibility is that a combination of weaker consumer
regulations and a push towards innovation directed at
the middle and higher ends of the market (in order to
underwrite the investment costs of implementing digital
services) will result in an increasingly complex and
confusing array of products and services. The resulting
complexity will add to the challenge of safely navigating
the financial services landscape.
However, if LMI consumer needs are not prioritized,
the catalytic role that fintech innovation could play
would be squandered. But another possibility is that
new collaborations among a diverse array of partners
– incumbent financial institutions, fintech innovators,
nonprofits, and the public sector – can transform the
financial services landscape and allow fintech to emerge
as a true catalyst for meaningful improvements in
financial inclusion.
RECOMMENDATIONS
To accomplish this transformation, we argue that private,
public, and philanthropic investments are needed in five
key areas:
Expanded research and investment in fintech innovation targeted specifically to the needs of the underserved;
24 Citi GPS: Global Perspectives and Solutions. “Digital Disruption: How FinTech is Forcing Banking to a Tipping Point.” P 4. March 2016. Accessed online June
2016: https://ir.citi.com/puIjT9V0Vo%2bvpc9RL2PEr26kiSGlvSxjFfLIK3Kum38daQckaOKRnVTtYIcAjRgiOrPWjfIasEQGQFyo8Fn5CQ%3d%3d25 Ibid.
Greater investment in the capacity of those parts of the non-profit and public sectors that are working directly with the underserved to link them to appropriate financial products and services and to improve their financial health;
Greater access of the underserved to reliable digital technology, including universal broadband and mobile technology;
An updated regulatory landscape that both protects consumers and allows for controlled experimentation; and
Improvements to the banking system, specifically modernization that allows faster payments and posting of deposits and universal adoption of enhanced security to address widespread consumer concerns about the safety of digital
financial services.
We believe that significant investments in these five
areas could help to build a financial ecosystem that
better meets the needs of the underserved and that
assists those struggling to reach or maintain financial
health. However, it would be naive to think that an
improved financial services landscape in and of itself can
turn the tide for many households who must deal with
increasingly volatile incomes, inadequate and stagnating
wages, declining access to workplace benefits such
as retirement, sick leave, and healthcare, and a fraying
social safety net. We cannot ignore the broader context
of what needs to be achieved to enable American
households to avoid the degree of financial instability
with which many are faced, undermining their prosperity
and that of the communities in which they reside.
The remainder of this paper is organized as follows.
In Section II, we go into greater depth about the
emergence of digital financial services in the United
States and place American consumer adoption of digital
financial services in a global context. In Section III, we
examine the potential of fintech to expand financial
inclusion (including a discussion of whether and how
underserved consumers access fintech). In Section IV,
we discuss the investments that are needed to realize
the potential that fintech represents.
1
5
3
4
2
UNC Center for Community Capital
TITLE
sss 28
GLOSSARY
What’s in a Word – A Glossary
DIGITAL FINANCIAL SERVICESThis term refers to financial services delivered through digital means (for instance, on mobile phones, online,
and through products such as stored value cards).
FINANCIAL INCLUSIONThis term refers a goal: for those underserved by current banking services to be able to access financial
services that are high quality, fairly priced, and to maintain or improve their financial health.
FINANCIAL WELL-BEINGReferring to the four dimensions of well-being (possessing control over ongoing finances, having the ability
to cope with a financial shock, setting and being on track to achieve financial goals, and having a sense of
financial freedom rather than being consumed with financial worry), we use the Consumer Financial Protection
Bureau’s definition of this term.26
FINTECH A portmanteau of the words financial and technology, “fintech” has become common in many circles. However,
there is not clear consensus on its meaning or its use.27, 28 We use the term broadly to describe the application of
technology innovation to the financial services sector.
INCUMBENT BANKS AND CREDIT UNIONSEstablished financial institutions (as distinct from new entrants into the financial services landscape).
MOBILE BANKINGMobile banking allows consumers to use their mobile phones to perform transactions they might otherwise
conduct from their personal computers or at a bank. Similarly, mobile payments enable consumers to use a
mobile device to transfer funds to another person (sometimes referred to as person-to-person, peer-to-peer, or
“P2P” transfers) or to pay for goods or services at retail locations.29
NON-BANK FINANCIAL INSTITUTIONSThese organizations operate without a formal bank charter and cannot take consumer deposits, but they may
provide services such as check cashing, money transmission, and certain kinds of loans.
NON-TRADITIONAL PROVIDERSFinancial services providers other than banks and credit unions, such as PayPal or Amazon.
ONLINE BANKINGThis term refers to banking services (such as account balance checks) delivered online.
UNDERSERVEDThis term includes the unbanked and the underbanked. Unbanked individuals have no checking or savings
accounts, and underbanked individuals have a checking or savings account, but use non-traditional providers
such as payday lenders or check cashing outlets.
26 United States Consumer Financial Protection Bureau. “Financial Well-Being: The Goal of Financial Education.” January, 2015. P. 5.27 Arner, W. Douglas., Janos N. Barberis, and Ross P. Buckley. “The Evolution of Fintech: A New Post-Crisis Paradigm?” October 20, 2015. Accessed online: https://
papers.ssrn.com/sol3/Papers.cfm?abstract_id=2676553;28 Schueffel, Patrick. “Taming the Beast: A Scientific Definition of Fintech.” December 2016. Accessed online:
https://www.researchgate.net/publication/314437464_Taming_the_Beast_A_Scientific_Definition_of_Fintech29 Federal Deposit Insurance Corporation. Mobile Banking and Payments: New Uses for Phones...and Even Watches.” 2015. Accessed online:https://www.fdic.gov/
consumers/consumer/news/cnsum15/mobilebanking.html
17
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
TH
E E
ME
RG
EN
CE
of
Fin
tech
in C
onsu
mer
Fin
anci
al S
ervi
ces
in a
Glo
bal C
onte
xt
FINTECH COMPANIES represent a growing portion of the United States financial services landscape
and present an exciting opportunity to expand financial inclusion. A global perspective, presented
in this section, helps us understand how the American fintech landscape is unique. Even more, this
perspective suggests ways that the U.S. can support important the sector’s infrastructure needs.
American consumers continue to expand their use
of digital financial services, however, face-to-face
interactions are still desired by many. For instance,
according to a recent consumer survey by Accenture,
online banking is now the dominant channel for
accessing financial services, with 28 percent of
consumers expressing a preference for online banking as their primary means of access and 60
percent of consumers reporting that they use it at least weekly.30 However, this is only slightly above
visiting a bank branch which was the first choice for 24 percent of those surveyed. Looking to the
future, 87 percent of those surveyed stated they would use bank branches in the future, including
86 percent of millennials.31 When asked why they would anticipate using their bank branch in two
years, the two most common responses reflect the value that consumers continue to place on
human interaction. At the top of the list was the response “I trust my bank more when speaking
to someone in person” (47 percent of respondents) and the second most common response
was “I receive more value from my bank when speaking to someone in person” (40 percent of
respondents.)
Consumers viewed mobile financial services, in contrast, as primarily transactional in nature, with the
top three reasons for using this channel being “making a payment, depositing a check, and viewing
a past transaction.” But while use of mobile banking may be limited in scope, the share is growing.
According to the Federal Reserve, mobile banking expanded steadily among mobile phone owners
with a bank account, growing from 33 percent in 2013 to 39 percent in 2014 and 43 percent in 2015.32
The Accenture survey also highlights the growing popularity of virtual online banking. In response
to the question “In the past 12 months, have you switched to a new financial services provider or
other company from your main bank?” 11 percent of those surveyed said they had switched to an
online bank and another 3 percent to an online payments provider. According to Accenture, virtual
online accounts are attracting consumers interested in simple transactions with low fees33 – certainly
features that would also be attractive to the underserved.
MEASURING UPTAKE
While consumers in the U.S. continue to embrace fintech services at an accelerating pace, the United
States lags other parts of the world in the overall share of its consumers that currently utilize digital
channels for financial services. Comparisons of the United States and Asia make this particularly
apparent but the U.S. disadvantage also holds when comparing the U.S. and some parts of Europe.
For example, in the United States in 2016, 46% of consumers reported that they used at least one
non-traditional financial firm for financial services, compared with 84% in China and 77% in India.
The comparable share in the UK stood at 49%, 43% in Australia, 41% in Japan, 40% in Canada and, at
the bottom of countries surveyed, 29% in the Netherlands (Table 1).34
30 Accenture Consulting. “2016 North America Consumer Digital Banking Survey.” Accessed online: https://www.accenture.com/
t20160609T222453__w__/us-en/_acnmedia/PDF-22/Accenture-2016-North-America-Consumer-Digital-Banking-Survey.pdf31 Ibid. FIGURE 4. “Consumers want human interaction at the bank branch of the future.” P. 11.32 Board of Governors of the Federal Reserve System. “Consumers and Mobile Financial Services 2016.” March 2016. P. 1.33 Accenture Consulting. 2016. “FIGURE 2. Online-virtual banks followed by payments providers lead in net switching among consumers
who switched.” P. 7.34 Capgemini and LinkedIn. “World FinTech Report 2017.” Page 13. Accessed on-line at: www.worldfintechreport2017.com.
RATHER THAN REPLACING
TRADITIONAL CHANNELS SUCH AS
BANK BRANCHES, CONSUMERS ARE
DIVERSIFYING HOW AND WHERE
THEY ACCESS FINANCIAL SERVICES.
19Cataylzing Inclusion: Financial Technology & the Underserved
CONSUMER USE OF NON-TRADITIONAL SOURCES OF FINANCIAL SERVICES BY COUNTRY IN 2016
Country Share of Survey Respondents*
China 84.4
India 76.9
United Arab Emirate 69.6
Hong Kong 53.5
Spain 53.3
Singapore 53.0
Turkey 51.6
United Kingdom 48.8
United States 45.8
Australia 42.8
Japan 40.6
Canada 39.6
France 36.2
Belgium 30.4
Netherlands 29.0
* Among survey respondents using only traditional or a combination of both traditional and nontraditional finances services.
Source: Capgemini and LinkedIn. World Fintech Report 2017. P 13.
Table 1.
In a similar survey conducted by Ernst and Young,
digitally active consumers were asked about their use
of fintech services over the previous six months (Table
2). Their report identified “17 distinct services offered
by FinTech organizations and non-traditional providers...
[and these] services are considered within the 5 broad
categories of money transfer and payments, financial
planning, savings and investments, borrowing, and
insurance…. We define a regular FinTech user as an
individual who has used two or more FinTech services in
the past six months.”
Because the study defines fintech adopters more
narrowly, the overall shares of fintech adopters by
country are all lower. In the United States, for example,
the shares drop from 46 to 33 percent of consumers.
Individual countries also shift their ranking to a certain
degree – for example, the United Kingdom jumps from
being ranked in the middle of the first list (share of users
of nontraditional financial services) to almost the top of
the second list (share of digitally active consumers using
two or more fintech services). In both lists, the United
States lands squarely in the middle of the pack.
UNC Center for Community Capital
THE EMERGENCE OF FINTECH IN CONSUMER
FINANCIAL SERVICES IN A GLOBAL CONTEXT
FINTECH ADOPTION AMONG DIGITALLY ACTIVECONSUMERS* BY COUNTRY IN 2016
Country Share of Survey Respondents*
China 69
India 52
United Kingdom 42
Brazil 40
Australia 37
Spain 37
Mexico 36
Germany 35
South Africa 35
United States 46
Hong Kong 32
South Korea 32
Switzerland 30
France 27
Netherlands 27
Ireland 26
Singapore 23
Canada 18
Japan 14
Belgium and Luxemburg 13
* Share of digitally active consumers who have used two or more fintech services in the previous six months.
Source: Ernst and Young FinTech Adoption Index 2017: The rapid emergence of FinTech. 2017.
Table 2.
21Cataylzing Inclusion: Financial Technology & the Underserved
Narrowing consumer sub-segments still further,
a survey by Ernst and Young explored the
fintech penetration of those most likely to be
early adopters – digitally active consumers
in large cities acround the world. Among this
group, American consumers assume the lead.
The survey found that New York City possessed
the highest share with 33.1 percent of digitally
active consumers reporting fintech use compared
with 29.1 percent in Hong Kong, 25.1 percent in
London, 16.3 percent in Sydney, and 14.7 percent in
Singapore.35
Y) than U.S., and over two and a half times the
number of smartphone users.39 In a similar vein, the
high penetration of mobile and weak consumer
banking systems have contributed to the rapid
growth of fintech adoption among consumers in
other emerging markets such as India, Kenya, the
Philippines, and Indonesia.40
CASE STUDIES: SWEDEN & THE U.K.
In some parts of Europe, in contrast, some argue that
the driving force for accelerated fintech adoption
has been a “pro-fintech philosophy”41 on the part
of governments. In Sweden, for example, early
infrastructure investments gave rise to the universal or
nearly universal availability of high speed broadband
which has made possible the high penetration of mobile
and internet use among consumers. Other elements
of the Swedish ecosystem contributing to the rapid
adoption of fintech have been the early adoption of an
e-identification system used by both the government
and the banking sector, tax credits that allowed for the
rapid acquisition of affordable but high-quality home
computers, and now a national push for cross-sector
partnerships through the Financial Sector Public-Private
Partnership (FSPOS) initiative.42
Elsewhere in Europe, the United Kingdom has a
reputation for possessing a regulatory system that
fosters fintech collaboration and innovation. In particular,
the U.K.’s Innovation Hub, under the oversight of the
Financial Conduct Authority, allows for the controlled
and time-limited suspension of regulatory requirements
in order to foster fintech experiments. A study
comparing fintech ecosystem attributes across several
countries found that the supportive policy environment
of the UK was a primary strength of its developing
fintech industry, while the U.S. led overall due its
strengths in talent, access to capital, and demand.43
Not surprisingly, some U.S. fintech companies have
expressed support for a regulatory regime that would
provide the kinds of flexibility and support for innovation
CASE STUDY: CHINA
In Asia, the lack of basic banking services in
many countries created a void where fintech and
other non-bank companies stepped in to meet
consumer demand, thus effectively leap-frogging
over the development of the kind of brick-and-
mortar financial services infrastructure available to
consumers in the U.S. and Europe.
In China, a Citigroup analysis posits that the fast
growth of FinTech stems from four factors: the
deep penetration of internet access and mobile
phone usage, a large e-commerce sector focused
on payments, a less-developed incumbent
financial system, and a regulatory structure that
has accommodated new entrants into the financial
services ecosystem.36 Additionally, the presence
of non-bank firms with access to deep pools of
capital has resulted in China’s e-commerce sector
being the largest in the world.37 A comparison
of China and the U.S. by Y Media Labs for the
purpose of understanding China’s dominant
position in fintech investment also shows that the
share of China’s consumers who are digital-savvy
is 50% higher than that in the United States.38
China also has over four times the number of
young residents (Millennials and Generation
35 Capgemini and LinkedIn. “World FinTech Report 2017.” Page 13. Accessed on-line at: www.worldfintechreport2017.com.36 Citi GPS: Global Perspectives and Solutions. “Digital Disruption: How FinTech is Forcing Banking to a Tipping Point.” March 2016. P. 9. Accessed online: https://
ir.citi.com/puIjT9V0Vo%2bvpc9RL2PEr26kiSGlvSxjFfLIK3Kum38daQckaOKRnVTtYIcAjRgiOrPWjfIasEQGQFyo8Fn5CQ%3d%3d37 Ibid.38 Arsene, Codrin. “10 Fintech Companies Giving Banks a Run for their Money.” Y Insights March 16, 2017. Accessed on-line: https://ymedialabs.com/top-10-fintech-
companies/39 Ibid. 40 Citi GPS: Global Perspectives and Solutions. Op cit. page 10.41 Citi GPS: Global Perspectives and Solutions. Op cit. page 24.42 Burr, Elliott. “The Fintech World Series: Sweden.” Kurtosys. May 10, 2017. Accessed online: https://blog.kurtosys.com/the-fintech-world-series-sweden/45 Ernst &
Young. “UK FinTech on the Cutting Edge – An Evaluation of the International FinTech Sector.” P. 7.43 Ernst & Young. “UK FinTech on the Cutting Edge – An Evaluation of the International FinTech Sector.” P. 7.
they view as being offered by that in the UK.44 At the
same time, balancing the need for fintech innovation
in order to stay competitive against the ongoing and
primary mandate for regulations to ensure the stability
of the banking system and to protect consumers is a
complex issue requiring a great deal of care.
CASE STUDY: INDIA STACK
India presents a fascinating example of a country where,
similar to the European examples, public investments
have funded the essential infrastructure for widespread
digital access. However, unlike Europe and similar to
other developing nations, it also lacks the traditional
banking infrastructure of a country like the United
States. As a result, roughly 47 percent of Indians are
unbanked, one of the highest rates of the underserved in
the world.45
To address this financial inclusion issue, as well as
to increase access to education and healthcare, the
government of India created an integrated platform
known as the “India Stack.” Designed and coordinated
by several key agencies and authorities, the India
Stack provides consumers with a nationally accepted
unique ID and e-signature capacity for safe digital
transfers of money both between persons (P2P) and
between businesses and persons (P2B). Even more, it
allows financial services providers access to a “Unified
Payments Interface” that transfers funds between
accounts, which supports the growth of a dynamic
fintech industry to serve unmet consumer needs.
As promising as the India Stack sounds for expanding
financial inclusion, the initiative is still very new and
has not fully overcome the kinds of issues that confront
many countries as they increase access to digital
financial services. As summarized in a recent profile of
the platform:
India Stack holds the potential to create a seamless system where all individuals and businesses can transact in a paperless and cashless fashion. Utilizing the India Stack architecture is bound to have very significant impacts on India’s drive to extend financial services to each and every one of its citizens. However, for these aims to be realized there is a need for improvement in connectivity infrastructure, bridging the gender gap in the ownership and use of technology, and encouraging all the players in the ecosystem to adopt digital payments at all points of the value chain. Furthermore, stakeholders must also pay attention and closely monitor the data security and privacy concerns of consumers.”46
44 Binham, Caroline. “UK regulators are the most fintech friendly” Financial Times. September 12, 2016. Accessed online: https://www.ft.com/content/ff5b-
0be4-7381-11e6-bf48-b372cdb1043a?mhq5j=e145 Demirgüc-Kunt., Asli., and Leora Klapper, Dorothe Singer, and Peter Van Oudheusden. “The Global Findex Database 2014 – Measuring Financial Inclusion
around the World.” World Bank Policy Research Working Paper 7255. World Bank Group. April 2015.46 Shreya, Chatterjee. “Digital Financial Services: India Stack and its Role in Financial Inclusion.” IMFR Lead. Accessed online: http://ifmrlead.org/wp-content/up-
loads/2016/12/India%20Stack%20and%20Financial%20Inclusion.pdf
THE EMERGENCE OF FINTECH IN CONSUMER
FINANCIAL SERVICES IN A GLOBAL CONTEXT
23
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
TAKEAWAYS
In cases around the globe, it is clear that public sector involvement has the capacity to aid development
and uptake. The kind of public investment that Sweden has made in universal consumer access to computer
technology and broadband, in addition to making digital services more secure through initiatives such as
universal e-identification, has allowed Sweden to emerge as a global leader in fintech innovation and digital
financial services adoption. Flexible and creative regulatory frameworks that allow experimentation by fintech
innovators – both incumbent and new entrants to the market – are giving countries like Sweden and the U.K. a
competitive edge in attracting fintech innovators.
However, regulators need to take great care to hold consumer and security protections to a high standard. The
fact that both the U.K. and Sweden have a reputation for ensuring high standards of consumer protection at
the same time they support innovation is encouraging. But, as more countries begin to use their regulatory
environment as an important factor in attracting fintech investment, forward-thinking regulators need to support
both national and international frameworks to avoid a race to the bottom.
Lack of access to needed financial services in places like China catalyzed the development of a digital financial
services landscape that leapfrogged over the development of a traditional banking infrastructure at a speed
unimagined a decade ago. This swift move to digital is now being replicated in many developing economies.
In the American context, consumers frustrated by what they view as the shortcomings of traditional banking
may also go directly to digital financial services providers in the same way that they have utilized providers of
alternative financial services such as payday lenders. Here again, a robust regulatory framework must ensure that
both consumer and safety and soundness protections remain strong in a changing financial services environment
so that digital channels offer high-quality consumer alternatives.
TH
E P
OT
EN
TIA
L
for C
onsu
mer
-Fac
ing
Dig
ital
Tec
hnol
ogy
to E
xpan
d Fi
nanc
ial I
nclu
sion
an
d Ca
pabi
lity
for U
nder
serv
ed C
onsu
mer
s
AS FINTECH HAS EMERGED as an important element of the financial services landscape, its
potential expand access to LMI consumers has become clear. While there are many challenges
ahead, there are also opportunities. Data show that people of color and lower-income consumers
are already adopting financial technology, and many providers have realized that this consumer
segment has unique needs that can be met by fintech tools.
In this section, we explore the characteristics of the underserved that can help us to understand their
financial services needs, the reasons they give for being unbanked or underbanked, and what they
desire from financial services providers. We then discuss several dimensions of fintech innovation
that have potential for meeting the needs of the underserved and provide examples of innovative
fintech products that meet each of those dimensions. Lastly, we explore the barriers to the adoption
of digital financial services that remain and how can they be addressed.
A. Profiles of the Unbanked and Underbanked
Understanding the diversity found in both the unbanked and underbanked populations can assist us
in exploring how digital financial services might help address their needs. As noted previously, the
FDIC reports that, according to their 2015 survey, 7 percent of all U.S. households – approximately
9 million households with 16.5 million adults – lack a checking or savings account (the unbanked).
An additional 19.9 percent of households – approximately 24.5 million households with 51 million
adults – rely on non-bank providers of financial services, even though they possess a bank account
(the underbanked).47 The 7 percent share of households that are unbanked represents a significant
drop from the 7.7 percent reported in 2013 and, while it still includes too many households, it does
show movement in the right direction and is the lowest share since the FDIC survey began. The
share of U.S. households characterized as underbanked has not changed since 2013.48 Below are
some additional dimensions of the unbanked population that can inform our understanding of which
groups should be the focus of efforts to reduce the number of underserved households and to how
to address their financial services needs. All statistics are from the FDIC survey of unbanked and
underbanked households in 2015.49
The relationship of the unbanked and underbanked households to the traditional banking system is often complex and shifts over time. For example, more than half of unbanked households were previously banked and approximately 26 percent say they are very or somewhat likely to open an account in the coming year.
The unbanked are highly likely to be low-income. Of those with incomes of $15,000 or less, 25.6 percent were unbanked compared with 7 percent overall, and for those with incomes between $15,000 and $30,000, 11.8 percent were unbanked.
The unbanked have lower levels of education than the banked. For those with less than a high school education, 23.2 percent were unbanked compared with 9.7 percent for those with a high school education, 5.5 percent for those with some college, and just 1.1 percent for those with a college degree.
Black households are approximately six times as likely to be unbanked (18.2 percent) than White households (3.1 percent) and Hispanic/Latino households are roughly 5 times as likely as White households (16.2 percent). Asian households had just slightly higher rates of being unbanked compared with Whites (4.0 percent).
Persons with a disability aged 25 to 64 also showed high rates of being unbanked – 17.6 percent compared with those in the same age group without a disability of 6.5 percent.
47 FDIC. “2015 FDIC National Survey of Unbanked and Underbanked Households .” October, 2016. P. 13.48 Ibid.49 Ibid.
25Cataylzing Inclusion: Financial Technology & the Underserved
Households with higher income volatility were more likely to be unbanked. The unbanked rate for households who also reported that their income varied a lot from month to month was twice as high (12.9 percent) as those who reported their incomes as steady from month to month. (5.7 percent.) And among the lowest income segment – those with incomes of less than $15,000 annually – the rate of being unbanked was 30 percent for those with incomes that varied somewhat or a lot, compared to those with low but steady incomes.
Even at higher income levels, income volatility appears to contribute to being unbanked. Among those earning between $50,000 and $75,000, the rate of being unbanked for those with incomes that varied a lot (4.1 percent) was more than four times the rate for households with a steady income (0.9 percent.)
By region, both unbanked and underbanked rates were highest in the South.
B. The Reasons Consumers Give for Being Unbanked or Underbanked
Underserved households give a variety of reasons for remaining unbanked or underbanked.50 In a 2011 study of
unbanked and underbanked households, the FDIC found that the most common reason given for lacking a banking
account was that the household lacked sufficient funds (38 percent of those surveyed). The second most common
reason given was that they “do not need or want an account” (26 percent). And while some consumers express concern
that banks won’t view them as desirable customers, according to the same study: “Fewer than 10 percent of unbanked
individuals report identification requirements, credit issues, or banking history issues as a primary obstacle to opening
an account, although this was more of a concern among Hispanic households (15 percent).”51
In several more recent studies, other reasons consumers reported for not opening an account or for closing an account
were the following:52
A lack of trust in banks, particularly if they had been assessed non-sufficient funds (NSF) fees after bouncing a check or had been turned down for a loan previously. Some consumers coming to the United States from countries where banks had been involved in problems, such as instances of fraud or banks closing without warning to their accountholders, also appear to transfer that lack of trust of their country of origin’s banking system to the United States.
A lack of transparency regarding when fees and higher interest rates would be assessed, leaving consumers feeling that the bank had hidden the terms of the account in small print and hadn’t fully explained the fee and penalty structure. Even though consumers know they ultimately may pay more to cash a check at a check casher, for instance, they also felt they knew exactly what they would be charged which gave them a greater sense of control over their finances.
The lag time between when a consumer deposited a check in his or her account and when it was processed and posted as being available. This is particularly problematic for consumers who execute most of their financial transactions in cash and thus need quick access to their funds.
Some consumers perceive an unfriendly atmosphere at banks, since many alternative services providers know customers by name. Some consumers stated that the suits and ties typically worn at mainstream banks were intimidating and made them feel out of place.
A lack of convenient hours, particularly non-workday hours such as evenings and weekends.
A lack of convenient locations or, in some cases, the lack of mainstream banks altogether.53
50 Rengert, Krisopher M. and Sherrie L.W. Rhine. “Bank Efforts to Serve Unbanked and Underbanked Consumers: Qualitative Research.” May 25, 2016. P. 7-8.
Economicinclusion.gov51 Burhouse, Susan. Matthew Homer, Yasmin Osaki, and Michael Bachman. “Assessing the Economic Inclusion Potential of Mobile Financial Services.” FDIC. P. 7.
June 30, 2014.52 See, for example, Rengert, Krisopher M. and Sherrie L.W. Rhine. “Bank Efforts to Serve Unbanked and Underbanked Consumers: Qualitative Research.” May 25,
2016. P. 7-8. Economicinclusion.gov; and Dahl, Drew and Michelle Franke. “Banking Deserts Become a Concern as Branches Dry Up.” St. Louis Fed The Regional
Economist. Second quarter 2017. https://www.stlouisfed.org/~/media/Publications/Regional-Economist/2017/Second_quarter_2017/bank_deserts.pdf53 Ibid.
THE POTENTIAL FOR CONSUMER-FACING DIGITAL
TECHNOLOGY TO EXPAND FINANCIAL INCLUSION AND
CAPABILITY FOR UNDERSERVED CONSUMERS
C. What Underserved Consumers Want from Financial Services Providers
The picture that emerges from the profile of the unbanked and underbanked is one of a diverse population struggling
to manage their financial lives in the face of income volatility and a banking sector that they do not trust. Reasons for
this distrust of mainstream financial institutions include: the perceptions of high and unpredictable fees, slow deposit
processing, and other factors. Nevertheless, many unbanked and underbanked households aspire to open a checking
and/or savings account and recognize that paying exorbitant fees and interest to manage their financial transactions
contributes to their financial instability. Given their need for greater financial control, what do underserved consumers
say about the features they desire in financial services and products?
In a recent study of the potential for mobile financial services to engage underserved consumers, the FDIC identified
seven core financial services needs of underserved consumers that provide a useful framework as outlined below:54
Control – Consumers want to know exactly when and why money is deposited and withdrawn from accounts; and they want to be certain about the terms and conditions of any financial products.
Access – Consumers expect financial providers to make their funds available quickly because they often need to use funds as soon as they are received to pay bills and make purchases.
Convenience – Consumers value convenience, both in terms of time and effort.
Affordability – Consumers are sensitive to the predictability and level of fees for account maintenance and everyday transactions, such as accessing cash.
Security – Consumers want protection from physical and electronic theft of funds or personal information.
Customer Service – Consumers expect to have the ability to access face-to-face help through their preferred banking channel.
Financial Management – Consumers seek advice on money management or the availability of tools to meet financial goals (e.g., spending reports, savings trackers).
While consumers are moving in the direction of greater
use of digital platforms such as online banking and
mobile, they are also utilizing digital financial services
from both traditional banks and credit unions and from
non-bank fintech providers. In addition, consumers may
receive assistance in accessing financial products from
third party intermediaries, such as nonprofit community-
based organizations and employers.
Based on an FDIC study and our own interviews with
experts, underserved consumers are sophisticated in
their understanding of financial institutions, non-bank
fintech companies, and non-profit intermediaries.
They understand that each possesses advantages and
disadvantages in meeting their needs and each has an
important role to play in scaling up financial inclusion.55
Where consumers feel non-bank fintech providers have
an edge:
Speed and ease of account opening – User-friendly interfaces on-line and via mobile make it fast and easy for consumers to open a new account without having to go to a physical branch bank or credit union with documentation in hand.
Convenience – The ability to bank at any time – not needing to rely on branches during business hours – means that customers can bank at any time of the day or night.
Faster and 24/7 access to account information – Online and mobile account access is almost instantaneous and doesn’t require waiting for customer service to pick up the phone or a wait in line to speak with a teller. For consumers living paycheck to paycheck, knowing when a deposit has been posted can be critical to avoiding costly fees and/or having transactions declined.
Affordability – Many free or low-cost fintech options exist that provide a range of services, from payments to savings.
54 Burhouse, Susan, Benjamin Navarro and Yazmin Osaki. “Opportunities For Mobile Financial Services To Engage Underserved Consumers: Qualitative Research
Findings.” FDIC. May 25, 2016. P. 1.55 Ibid. p. 22-26.
27
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
Fewer fees or no fees, plus greater transparency – Somewhat related to affordability, consumers perceive that non-bank options have fewer fees or are more clear about what fees will be assessed and when. For example, some consumers prefer a non-traditional provider whose fees may be somewhat higher but they are clear about exactly what the cost will be and can factor it into their financial planning.
Ease of use and innovative consumer interfaces – Many fintech innovations focus on improving the customer experience as a primary means to attract new users.
Where consumers feel that traditional financial services
providers (banks and credit unions) have an edge:
Security of account information and funds – Consumers feel greater confidence in the existing framework of banking regulations and consumer protections that apply to traditional financial services providers and are less confident that non-bank providers meet the same levels of security.
Ability to speak with financial institution personnel in person and receive financial advice – While having to go to a branch bank is perceived as a negative in some respects, consumers also appreciate the fact that they can go to a branch and speak with a teller or other branch personnel when they need account assistance or other financial advice.
In-person account opening – Some consumers prefer to meet with their financial services provider in person when opening an account so they can understand their options and feel secure that the institution is legitimate.
Wider variety of products available – Some consumers feel that traditional providers are more likely to offer them alternative products, such as checking or savings accounts with a variety of features as well as credit cards, check cashing services, and more.
Where consumers feel that nonprofit financial services
providers have an edge:
Trustworthiness – Community-based organizations often provide other supportive services and have a proven track record of assistance to residents. Nonprofits are felt to have the best interests of consumers in mind, rather than promoting products and services that consumers may not need and/or that are chosen because they contribute to the organization’s bottom line.
Ability to talk with someone in person and ask for advice – Consumers and providers highlight the desire to speak to someone one-on-one for financial advice Consumers may feel comfortable using digital financial tools, but nevertheless want to be able to meet with someone face-to-face, especially in times of financial stress or when facing a major financial decision.
Ability to combine financial services with other programs, such as affordable housing or workplace services – Consumers appreciate the ability to access financial services and financial advice that are integrated into systems they already use – such as workplace retirement systems or affordable housing programs.
TAKEAWAYS
We note that the advantages outlined above are largely
based on consumer experiences and perceptions,
rather than an in-depth rigorous comparison, and are
generalized across a broad range of providers. For
example, some non-bank providers may have very
secure systems and some banks and credit unions may
provide very affordable services with few unexpected
fees. But, understanding consumer perceptions can
inform efforts to better meet their needs and address
their concerns across a range of products and providers.
THERE ARE OPPORTUNITIES FOR
COLLABORATION: FOR EACH CLASS OF
PROVIDER TO BUILD ON ITS STRENGTHS, TO
ADDRESS ITS PERCEIVED WEAKNESSES, TO
BUILD ON EXISTING PARTNERSHIPS, AND TO
DESIGN NEW COLLABORATIONS THAT TAKE
ADVANTAGE OF EACH OTHERS’ PERCEIVED
STRENGTHS.
THE POTENTIAL FOR CONSUMER-FACING DIGITAL
TECHNOLOGY TO EXPAND FINANCIAL INCLUSION AND
CAPABILITY FOR UNDERSERVED CONSUMERS
IMPORTANCE OF BANK BRANCHES
Beyond what consumers want, it is important to
understand how consumers interact with their financial
services providers across multiple channels (Table 3).56
Among survey respondents with a bank account, going
to a bank branch remains the most common means of
accessing banking services (84 percent), while using an
ATM is the second most common means of access (75
percent).
56 Board of Governors of the Federal Reserve System. “Consumers and Mobile Financial Services 2016.” March 2016. “Figure 2: Usage of different means of
accessing banking services. “Page 9.57 Ibid. Box 2. “Banking Status and the Use of Mobile Banking and Payments – continued.” Figure A. Phone ownership by banking status and Figure B. Mobile
banking and payments use by banking status. Page 11.
HOW BANK ACCOUNT HOLDERS ACCESS BANKING SERVICES 57
Means of Access Share of Survey Respondents*
Bank Branch 84%
ATM 75%
Online Banking 71%
Mobile Banking 38%
Telephone Banking 30%
*Among those with a bank account regardless of whether they own a mobile phone and/or have internet access.
The share of those utilizing online banking (71 percent)
fell just below those using an ATM, confirming our earlier
finding that online banking is gaining acceptance and
popularity. The share of those using mobile banking
fell far below bank braches, ATM, and online banking at
just 38 percent, while account holders used telephone
banking at even lower rates (30 percent).
Table 3.
29Cataylzing Inclusion: Financial Technology & the Underserved
Given the continued dominance of bank branches as the
means by which consumers access banking services,
what does the reduction in the number of U.S. bank
branches over the past decade mean for expanded
financial inclusion? According to a report by the Federal
Reserve Bank of New York, U.S. banks closed over
4,800 branches between 2009 and 2014. Though these
closings have occurred across multiple geographic
regions and census tracts, lower-income tracts, minority
neighborhoods, and rural communities continue to be
most deeply affected by the lack of brick-and-mortar
bank branches.
This is, in large part, due to the sweeping deregulation
that occurred in the financial services sector in the
1990s.58 To a lesser extent, some banks have slightly
increased their branch presence, but that has occurred
in primarily urban and more economically affluent cities
as part of a customer acquisition strategy, though this
trend is not necessarily expected to continue.59, 60 While
innovations in fintech can play a key role in increasing
financial inclusion, particularly in these bank deserts
where few or no physical bank branches exist, research
indicates that the availability of brick-and-mortar
financial services within communities is associated with
positive financial health outcomes.61
Traditional brick-and-mortar branches remain the
access-point through which a significant share of
customers open checking and savings accounts, apply
for mortgages, and access other forms of credit.
Without a bank branch in the community, lower-income
households have limited access to safe and affordable
products and may turn to higher cost financial
alternatives, such as payday lenders and check-cashers.62
58 Morgan, Donald., Maxim Pinkovskiy, and Bryan Yang. “Banking Deserts, Branch Closings, and Soft Information.” Liberty Street Economics, Federal Reserve Bank
of New York. March 7, 2016. Accessed online: http://libertystreeteconomics.newyorkfed.org/2016/03/banking-deserts-branch-closings-and-soft-information.html 59 Citi Global Perspectives & Solutions. 2016. Digital Disruption: How FinTech is Forcing Banking to a Tipping Point. 60 Citi Global Perspectives & Solutions. 2017 Digital Disruption – Revisited: What FinTech VC Investments Tell Us About a Changing Industry.61 Friedline, Terri., Mathieu Despard, and Stacia West. “Navigating day-to-day finances: A geographic Investigation of brick-and-mortar financial services and
households’ financial health.” Lawrence, KS: University of Kansas, Center on Assets, Education, & Inclusion (AEDI). 2017; Friedline, Terri, Mathieu Despard, and
Stacia West. 2017. “Investing in the Future: A Geographic Investigation of Brick-and-Mortar Financial Services.”62 Friedline, Terri., and Mathieu Despard. “Life in a Banking Desert.” The Atlantic Magazine. March 13, 2016. Accessed online: https://www.theatlantic.com/business/
archive/2016/03/banking-desert-ny-fed/473436/ 63 Ergungor, Ozgur E. “Bank Branch Presence and Access to Credit in Low- to Moderate-Income Neighborhoods.” Journal of Money, Credit, and Banking, vol. 42,
No. 7. October 2010; Friedline, Terri, Mathieu Despard, & Stacia West. Investing in the Future: A geographic Investigation of brick-and-mortar financial services
and households’ financial health.” Lawrence, KS: University of Kansas, Center on Assets, Education, & Inclusion (AEDI), February 1, 2017.64 J.D. Power. U.S. Retail Banking Satisfaction Study. 2017.
Additionally, one of the greatest negative impacts for
consumers of bank closings is seen in mortgages and
small business lending, areas that translate into wealth
building opportunities for individuals and economic
growth for neighborhoods and communities.63 This type
of lending is one of the least well developed areas of
fintech, leaving those without a nearby bank branch with
few options for accessing this type of credit.
Finally, although the adoption of fintech has been
higher among younger consumers compared to older
consumers, recent research from JD Power indicates
that for Millennials, in particular, the combination
of mobile banking and access to a branch leads to
significantly higher levels of overall satisfaction.64 Despite
the potential for fintech to help fill in the gaps where
traditional banks and banking may be difficult to access,
it is not enough on its own to fill all of the financial
needs of consumers. Instead, the likely road ahead is
for consumers to demand multi-channel access to their
financial information and services and the challenge for
providers remains making the highest and best use of
each channel, thus simultaneously delivering lower costs
and higher levels of customer satisfaction.
WHILE INNOVATIONS IN FINTECH CAN PLAY
A KEY ROLE IN INCREASING FINANCIAL
INCLUSION, THE AVAILABILITY OF BRICK-
AND-MORTAR FINANCIAL SERVICES WITHIN
COMMUNITIES IS ASSOCIATED WITH
POSITIVE FINANCIAL HEALTH OUTCOMES.
65 Pew Research Center. “Mobile Fact Sheet.” January 12, 2017. Accessed online: http://www.pewinternet.org/fact-sheet/mobile/ and Pew Research Center.
“Internet/Broadband Fact Sheet.” January 12, 2017. Accessed online: http://www .pewinternet.org/fact-sheet/internet-broadband/66 Pew Research Center. “Home Broadband 2015.” Page 2. 67 Ibid, page 3.68 Ibid. page 3.69 Ibid. page 5.
D. Consumer Access To and Use Of Digital Financial Services
In our earlier discussion of consumer adoption of digital financial services in a global context, we noted that leading
fintech countries like Sweden and China have been able to take advantage of the high shares of their populations
with access to broadband and/or mobile technology. In this section, we explore the evidence on consumer access to
digital financial services in the United States. To begin, we explore the question of consumer access to two tools: home
broadband services and smartphones.
ACCESS TO DIGITAL FINANCIAL SERVICES
In 2017, the Pew Research Center released a detailed
study of consumer access to both broadband and
smartphones broken down by demographic group (Table
4).65 Overall in 2016, 88 percent of U.S. adults used the
internet but considerably fewer – 73 percent – had home
broadband access. And while home broadband access
has slowed its penetration in recent years, smartphone
ownership continues to increase and now stands at 77
percent of all adults as of the end of 2016, up from 59
percent in 2014 and 69 percent in 2015.
The Pew study also highlights the fact that a growing
number of consumers have smartphones but no
home broadband, which Pew characterizes as being
“smartphone dependent.” And while having a
smartphone may be replacing home broadband as the
preferred channel for digital connectivity for a certain
consumer segment, Pew researchers argue that it may
come with its own challenges. For instance, “smartphone
dependent” consumers are more likely to be affected by
data-cap limits in their service plans, more likely to have
to suspend or cancel their service because of financial
constraints, and are often at a disadvantage when
required to fill out online job applications that do not
translate well to a mobile format.66 The study notes that
“Roughly two-thirds (69 percent) of Americans indicate
that not having a home high-speed internet connection
would be a major disadvantage to finding a job, getting
health information or accessing other key information –
up from 56 percent who said this in 2010.”67
When we examine home broadband access and
smartphone access by demographic subgroups, we also
see certain groups have much lower rates than average
(Table 4). In the case of home broadband access, adults
who live in rural areas (63 percent) are age 65 or older
(51 percent) are Black (65 percent) or Hispanic (58
percent), have less than a high school education (34
percent) or only a high school education (52 percent)
or have an annual income of less than $30,000 (63
percent) all are at a distinct disadvantage. Similar
disparities emerge in smartphone ownership where a
lack of smartphone ownership is most apparent among
rural adults (67 percent), those age 65 or over (42
percent), and those with lower levels of education and
income. Notably, the racial disparity in home broadband
access does not carry over to smartphone ownership.
However, Blacks (15 percent) and Hispanics (23 percent)
have higher rates of smartphone dependency than
Whites (9 percent.) The Pew findings do not reflect
a technology divide between women and men in
accessing digital services.
Smartphone dependency is also highest among those
who are young, have lower incomes, and lower levels
of education. For those opting not to subscribe to a
home broadband service, cost was the most important
reason cited for the decision (43 percent overall, with
33 percent naming the monthly subscription cost as the
reasons and another 10 percent naming the cost of the
computer). Another 12 percent felt that their smartphone
performed a good enough job and 10 percent had
another option outside the home.68 Given the importance
of financial considerations in opting out of broadband
access, it is not surprising that we see higher levels of
smartphone dependency among those demographic
groups that are, on average, lower income.
The Pew study also notes that 25 percent of those not
subscribing to broadband services expressed interest in
doing so in the future (see page 40 for a discussion of
this phenomenon).69
THE POTENTIAL FOR CONSUMER-FACING DIGITAL
TECHNOLOGY TO EXPAND FINANCIAL INCLUSION AND
CAPABILITY FOR UNDERSERVED CONSUMERS
31Cataylzing Inclusion: Financial Technology & the Underserved
U.S. ADULTS AND DIGITAL SERVICES70
Category Internet Use Broadband Access
Owns Smartphone
Smartphone Dependent71
All U.S. Adults 88% 73% 77% 12%
Location
Urban 89% 73% 77% 12%
Suburban 90% 76% 79% 12%
Rural 81% 63% 67% 14%
Age
18–29 99% 77% 92% 17%
30–49 96% 81% 88% 13%
50–64 87% 75% 74% 11%
65+ 64% 51% 42% 7%
Race/Ethnicity
White, Non-Hispanic 88% 78% 77% 9%
Black, Non-Hispanic 85% 65% 72% 15%
Hispanic 88% 58% 75% 23%
Gender
Female 86% 72% 75% 12%
Male 89% 74% 78% 12%
Education
Less than High School 68% 34% 54% 27%
High School 81% 62% 69% 15%
Some College 94% 80% 80% 12%
Bachelor’s Degree 98% 91% 89% 5%
Income Group
Less than $30,000 79% 53% 64% 21%
$30,000–$49,999 90% 71% 74% 12%
$50,000–$74,000 95% 83% 83% 10%
$75,000+ 98% 93% 93% 5%
Table 4.
70 Pew Research Center. “Mobile Fact Sheet.” January 12, 2017. Accessed online: http://www.pewinternet.org/fact-sheet/mobile/ and Pew Research Center.
“Internet/Broadband Fact Sheet.” January 12, 2017. Accessed online: http://www .pewinternet.org/fact-sheet/internet-broadband/71 Defined by the Pew Research Center as having a smartphone but no traditional home broadband service.
USE OF DIGITAL FINANCIAL SERVICES
Next, given the generally high but not universal levels of
access to home broadband services and smartphones,
we next explore whether digital access translates into
high use of digital financial services and how those
might also vary by demographic group using a study
of consumers and their use of mobile financial services
from the Federal Reserve.72 The study examines the rates
of phone ownership among the fully banked (having a
checking or savings account and not using alternative
financial services), the underbanked and the unbanked.
USE OF MOBILE FINANCIAL SERVICES BY THE UNBANKED, UNDERBANKED, AND FULLY BANKED 73
Phone Ownership Mobile Phone Owners
Category Smartphone Feature Phone* No Phone Mobile Banking Mobile Payments
Fully Banked 70% 20% 10% 39% 20%
Underbanked 70% 17% 13% 55% 34%
Unbanked 40% 28% 32% NA** NA**
*A cell phone that is not a smartphone.
**Among those with a bank account regardless of whether they own a mobile phone and/or have internet access.
Examining the data in Table 5, we see that 70 percent of
the fully banked and underbanked owned a smartphone,
compared with only 40 percent of the unbanked. Among
mobile phone owners, the fully banked were much less
likely to utilize mobile banking (39 percent) compared
with the underbanked (55 percent) and also much less
likely to utilize mobile payments (20 percent among the
fully banked and 34 percent among the underbanked).
Table 5.
Using similar but not identical demographic breakdowns
as that employed in the Pew study, the Federal Reserve
surveyed smartphone users about their mobile banking
use in the prior 12 months (Table 6). The youngest age
groups, consumers of color (Black and Hispanic), and
those with the lowest incomes had the highest shares
of those utilizing mobile banking services. Keep in mind,
however, that these statistics only reflect usage among
mobile phone owners and that these demographic
groups were also the least likely to own smartphones.
A similar but slightly different pattern of disparities
emerges when examining utilization of mobile payments
among smartphone users (Table 7). Here, we still see
higher than average usage rates among consumers of
color and low-income adults, but it is a slightly older age
group showing the highest utilization rates (those aged
30 to 44). Overall, a smaller share of Americans utilize
mobile payments than mobile banking. And for both
mobile payments and mobile banking, an equal share of
men and women take advantage of these digital
services, again indicating the lack of a gender gap.
72 Board of Governors of the Federal Reserve System. “Consumers and Mobile Financial Services 2016.” March 2016. Accessed online: https://www.federalreserve.
gov/econresdata/consumers-and-mobile-financial-services-report-201603.pdf73 Ibid. Box 2. “Banking Status and the Use of Mobile Banking and Payments – continued.” Figure A. Phone ownership by banking status and Figure B. Mobile
banking and payments use by banking status. Page 11.
THE POTENTIAL FOR CONSUMER-FACING DIGITAL
TECHNOLOGY TO EXPAND FINANCIAL INCLUSION AND
CAPABILITY FOR UNDERSERVED CONSUMERS
33Cataylzing Inclusion: Financial Technology & the Underserved
USE OF MOBILE BANKING IN THE PAST 12 MONTHS AMONG SMARTPHONE USERS74
Category No Yes Number of Respondents
# Respondents 843 775 1622
Age
18-29 30% 70% 240
30-44 36% 63% 392
45-59 57% 43% 512
60+ 70% 29% 478
Race/Ethnicity
White, Non-Hispanic 51% 48% 1218
Black, Non-Hispanic 42% 58% 122
Other, Non-Hispanic 41% 59% 72
Hispanic 34% 66% 168
2+ Races, Non-Hispanic 52% 49% 42
Gender
Female 46% 53% 801
Male 47% 53% 821
Education
Less than high school 45% 51% 49
High School 54% 46% 375
Some College 43% 57% 518
Bachelor’s Degree or Higher 45% 55% 680
Income Group
Table 6.
74 Board of Governors of the Federal Reserve System. “Consumers and Mobile Financial Services 2016.” March 2016. Table C78.a. Cross-tabulations for consumers’
use of mobile banking by age, race, gender, education, and income: Smartphone users. Page 76.
Less than $25,000 35% 62% 104
$25,000-$39,999 49% 51% 234
$40,000-$74,999 54% 46% 252
$75,000-$99,999 45% 55% 474
Greater than $100,000 46% 54% 558
75 Board of Governors of the Federal Reserve System. “Consumers and Mobile Financial Services 2016.” March 2016. Table C78.b. Cross-tabulations for consumers’
use of mobile payments by age, race, gender, education, and income: Smartphone users. Page 77.
THE POTENTIAL FOR CONSUMER-FACING DIGITAL
TECHNOLOGY TO EXPAND FINANCIAL INCLUSION AND
CAPABILITY FOR UNDERSERVED CONSUMERS
Table 7.
USE OF MOBILE PAYMENTS IN THE PAST 12 MONTHS AMONG SMARTPHONE USERS75
Category No Yes Number of Respondents
# Respondents 1268 406 1680
Age
18-29 70% 32% 263
30-44 63% 36% 414
45-59 72% 23% 523
60+ 83% 17% 480
Race/Ethnicity
White, Non-Hispanic 77% 23% 1,250
Black, Non-Hispanic 63% 37% 131
Other, Non-Hispanic 56% 44% 74
Hispanic 65% 34% 179
2+ Races, Non-Hispanic 66% 34% 46
Gender
Female 70% 29% 831
Male 73% 27% 849
Education
Less than High School 70% 30% 63
High School 74% 26% 398
Some College 72% 28% 532
Bachelor’s Degree or Higher 69% 30% 687
Income Group
Less than $25,000 59% 41% 124
$25,000-$39,999 71% 29% 250
$40,000-$74,999 80% 19% 263
$75,000-$99,999 72% 27% 477
Greater than $100,000 71% 29% 566
35
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the UnderservedIII. THE POTENTIAL FOR CONSUMER-FACING DIGITAL
TECHNOLOGY TO EXPAND FINANCIAL INCLUSION AND
CAPABILITY FOR UNDERSERVED CONSUMERS
E. The Potential Advantages of Mobile Financial Services for the Underserved
In the previous section, we discussed research showing that while ownership of mobile smartphones is expanding,
gaps remain in access to smartphones among some demographic groups that are also more likely to be underserved
by mainstream banking services (including those in rural areas, those with lower levels of education, those with lower
incomes and, to a lesser extent, Blacks and Hispanics). At the same time, among smartphone owners, underserved
populations (including consumers of color, young consumers, and LMI consumers) were the most likely to utilize mobile
banking services. Thus, there is an opportunity to connect underserved borrowers to better services via mobile financial
services (MFS).
What advantages might these consumers be finding in utilizing mobile financial services? An FDIC report on the
financial inclusion potential of mobile financial services presents a useful framework for thinking about the benefits of
various features of mobile banking and how these benefits align with the consumer needs referenced earlier – control,
convenience, affordability, security, access to money, and long-term financial management (Table 8).
Each of the five features listed – checking balances and transactions, alerts, bill pay, peer-to-peer transfers, and
mobile deposits (also known as mobile remote deposit capture, or mRDC) – is associated with multiple benefits.
Furthermore, each of these features brings additional control and convenience for consumers.
UNC Center for Community Capital
THE POTENTIAL FOR CONSUMER-FACING DIGITAL
TECHNOLOGY TO EXPAND FINANCIAL INCLUSION AND
CAPABILITY FOR UNDERSERVED CONSUMERS
WAYS THAT MOBILE FINANCIAL SERVICES CAN BENEFIT CONSUMERS 76
MFS Feature Benefits Consumer Needs Addressed
Checking Balance and
Transaction History
• Provides access to account
information anytime and anywhere
• Saves time/trips to providers
• Helps budget
• Helps inform on-the-spot
spending decisions
• Control
• Convenience
• Long–Term Financial Management
Alerts
• Provides access to account
transaction and balance information
• Helps consumers avoid fees
• Helps monitor accounts for fraud
• Control
• Convenience
• Affordability
• Security
Bill Pay
• Ensures timely payment
• Save money over other methods
that carry varying convenience fees
• Saves time/trips to providers
• Provides ability to pay bills anytime
and anywhere
• Control
• Convenience
• Affordability
Peer-to-Peer
Transfers
• Enables immediate settling of
personal debts
• Faster than other methods
• Saves time/trips to providers
• Control
• Convenience
Mobile Remote
Deposit Capture (mRDC)
• Helps deposit money faster
• Saves time/trips to providers
• Control
• Convenience
• Access to Money
Table 8.
76 Burhouse, Susan. Matthew Homer, Yasmin Osaki, and Michael Bachman. “Assessing the Economic Inclusion Potential of Mobile Financial Services.” FDIC. P. 20.
June 30, 2014. Available online: https://www.fdic.gov/consumers/community/mobile/mfs_qualitative_research_report.pdf
37
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
PRICING
This report features products that are free or low-
cost, since these have the greatest applicability for
expanding financial inclusion. However, it can be
difficult for providers to offer fintech products without
charging a fee. Like anyone else who must pay their
bills, fintech providers must decide on a business model
that works for both their bottom line and for their
customers. In general, that means choosing between
one or a combination of four options: 1) charging a fee
for a subscription or based on use; 2) allowing paid
advertising visible to users; 3) referring users to a select
group of related products and getting paid for those
referrals; or 4) selling customer data to third parties.
Each of these four options has pros and cons from
the perspective of financial inclusion and consumer
protection. The most transparent option is probably
charging a fee, assuming the fee is straightforward and
doesn’t come with hidden charges. While a fee may
exclude those who don’t want or are unable to pay it, it
allows consumers to decide whether the price is worth
the service or to look for another option.
Selling paid advertising is also relatively straightforward
and gives consumers the choice of going elsewhere if
the advertising feels intrusive or offensive.
The third option of referring users to the purveyors of
other products is a bit more complex. On the one hand,
users don’t have to use any of the products offered and
can still access the original fintech product or service
for free (and if they trust the fintech provider, they
may welcome recommendations for other products
since it saves them time having to vet a complex array
of products). On the other hand, users may question
whether the referrals are the best available or whether
they are simply the products that the sponsor has a
commercial relationship with.
The last option – selling customer data to third parties
– can be problematic because it’s the most difficult for
consumers to identify and understand. Consumers sign
away their personal data all the time, but that doesn’t
mean they always understand when they’re doing it
or how their data will be used. This is an area where
greater attention to clear and prominent disclosure
language would be extremely helpful and where the
Consumer Finance Protection Bureau is working with
both innovators and consumer advocates to make
improvements. In each of these areas, consumer
protections are needed to ensure that individuals are not
burdened by unfair fees or referred to harmful products
under false pretenses.
UNC Center for Community Capital
THE POTENTIAL FOR CONSUMER-FACING DIGITAL
TECHNOLOGY TO EXPAND FINANCIAL INCLUSION AND
CAPABILITY FOR UNDERSERVED CONSUMERS
Table 9.
EXAMPLES OF FINTECH INNOVATIONS THATCAN PROMOTE FINANCIAL INCLUSION
Potential Benefit Description Fintech Examples
Expand Access Making products and services
available to consumers who are
underserved, locked out of the
banking system, or have unique
or special needs
EARN Savings: automated matched savings accounts for LMI
consumers
Aspiration – provides high-quality and affordable banking
and investing services
Prism Pay Bills – allows the user to link all bills and then pay
them from one app, without having to log into multiple sites
Amazon Cash – allows consumers to load cash into their
Amazon account via participating retail partners and then
shop Amazon online
WiseBanyan – makes free financial advice widely available
Improve Consumer
Control
Empowering consumers to make
day-to-day decisions or adopt
spending and savings habits that
are more consistent with their
long-term aspirations
Clarity Money – automated savings deposits with features to
find better credit cards, eliminate subscriptions, and reduce
bills
Dave – allows consumers to track their account balances
and to request a payday advance to avoid NSF fees when
unexpected expenses arise
Digit – analyzes consumer cash flow and sets small amounts
of money aside to meet savings goals
Even – smooths out income over the month to avoid fees and
financial stress
Level – smooths out fluctuations in income and spending and
gives consumers updates on suggested levels of available
funds to use
Mint – budgeting, goal setting, and money management
EXAMPLES OF FINTECH INNOVATIONS
Taking the FDIC framework a step further, in Table 9 we list a range of potential fintech benefits and then associate
each one with a number of currently available fintech products and services. For example, EARN Starter Savings
expands access to automated and matched savings accounts, while BEE increases access to high quality and
affordable retail consumer financial services. Multiple fintech products allow consumers to increase control over their
finances through smoothing out income and expenses (Digit, Even, Smooth) while others provide a payday advance
in order to avoid bouncing checks (Dave) or allow budgeting and goal setting (MINT). Metromile allows consumers
to purchase auto insurance by the mile, a potentially significant cost-savings for those who drive less than average
but still want to have a car. This is by no means an exhaustive list (see pages 50-59 for more examples of innovative
fintech products and services), but it provides a sense of how fintech products are addressing the needs of the
underserved.
39
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
Reduce Prices Driving down costs through
increased competition or
adoption of technologies that
reduce operating costs
Metromile – allows consumers to purchase car insurance by
the mile, saving low mileage drivers insurance premium costs
WorldRemit – provides a swift way to transfer money across
125 countries for a low transaction fee
Betterment – retirement portfolio advising at a lower price
than typical financial advising services
Increase Features
and Functionality
Adding or improving
functionality so that consumers
can benefit from new financial
services that work better, are
easier or quicker to use, or are
more widely available
FreshEBT – allows SNAP recipients to monitor their card
balances and to find community food and nutrition programs
Nova – provides for credit reporting across borders
Venmo – allows person to person (P2P) money transfers
via mobile phone
Zelle – allows person to person (P2P) money transfers
between accounts at participating banks
Token Transit – easy way to pay for public transportation
with a mobile app
Enhance Safety
and Security
of Products and
Services
Includes better defenses against
data breaches, mechanisms to
avoid or reduce errors, and more
efficient correction of mistakes
ECreditHero – free help for consumers to correct credit
report errors
EverSafe – monitors seniors’ accounts, credit cards and
reports to detect fraud and protect against identity theft
Promote
Transparency
Improve transparency and
consumer understanding to
help consumers choose the
best products and services
for themselves and use them
Credit Karma – free access to credit reports and scores
Ready for Zero – assists users to pay down debt using
a well-defined but flexible plan
Table 9 Continued.
EXAMPLES OF FINTECH INNOVATIONS THAT CAN PROMOTE FINANCIAL INCLUSION
Potential Benefit Description Fintech Examples
THE POTENTIAL FOR CONSUMER-FACING DIGITAL
TECHNOLOGY TO EXPAND FINANCIAL INCLUSION AND
CAPABILITY FOR UNDERSERVED CONSUMERS
F. Barriers Impacting the Adoption of Fintech
Though research highlights factors that encourage take-up and engagement with fintech products, some barriers to
adoption persist. For example, many consumers are comfortable with their current banking habits and don’t perceive
enough advantages of digital financial services to add or switch to them. According to a recent report by the Federal
Reserve, nearly 90 percent of consumers that did not utilize mobile banking services stated that their banking needs
were already being met without the use of mobile banking.77 Nearly 80 percent indicated that they simply did not see
any reason to use mobile banking.78 Similarly, 70 percent of individuals with no broadband access express no interest in
having it in the future.79 Thus, some consumers remain uninterested in fintech offerings.
77 Board of Governors of the Federal Reserve System. “Consumers and Mobile Financial Services 2016.” March 2016. Table C78.b. Cross-tabulations for consumers’
use of mobile payments by age, race, gender, education, and income: Smartphone users. Page 77.78 Ibid.79 Pew Research Center. “Internet/Broadband Fact Sheet.” January 12, 2017. Accessed online: http://www .pewinternet.org/fact-sheet/internet-broadband/80 Board of Governors of the Federal Reserve System. “Consumers and Mobile Financial Services 2016.” March 2016. Table C78.b. Cross-tabulations for consumers’
use of mobile payments by age, race, gender, education, and income: Smartphone users. Page 77.81 Davis, Katy. Piyush Tantia. “A Behavioral Perspective on Digital Engagement.” Ideas42. July 13, 2017.
For some, the increasingly diverse and complex
landscape of financial products can leave them feeling
paralyzed and overwhelmed by the breadth of tools
available. This may be particularly pronounced when
tools are promoted through a source they do not know
or trust. And while distrust of digital and mobile delivery
channels is fading, consumers’ uncertainties related
to data security continues to negatively impact the
adoption of some fintech and mobile banking products.
Data from the Federal Reserve shows that just over
40 percent of consumers report that they don’t trust
technology, and more than 70 percent of consumers
cited security as a reason why they did not use mobile
banking services specifically.80
A lack of familiarity with or difficulty using technology
creates a significant barrier that is not easily overcome.
Approximately one out of five respondents to the
Federal Reserve survey felt that it was too difficult to
use mobile banking. In response to a question about the
use of mobile payments, more than one-third said that
mobile payments were too difficult or time consuming
to set up. It is not clear, however, if certain elements of
these tools created the most difficulty or if consumers
felt an overall discomfort.
One possible factor limiting adoption of a variety of
new digital options is the lack of a guided onboarding
process to address consumer uncertainty at any point
in the enrollment process. In its work with Alliant Credit
Union, based in Chicago but providing banking services
nationally, consulting partner Ideas42 explored why
more credit union customers were not taking advantage
of the convenience of mobile check deposits.81
Going directly to the credit unions members, Ideas42
identified the most significant barriers to mobile deposit
adoption – the misperception that the process would
be a hassle, combined with preference for the way
they had always done things. Since check deposits
were infrequent, avoiding a trip to the bank by using
mobile deposit was not a big enough advantage to get
customers to change their habits. But they also found
that if customers tried mobile check deposit once and
found out how easy and secure it was, then they used
it repeatedly. As Ideas42 explained, “We only need to
get them to overcome their initial hesitancy to try it, just
once!”
GUIDED ONBOARDING AND FOLLOW-
UP FROM A TRUSTED SOURCE CAN
ASSIST WARY CUSTOMERS TO TRY
INNOVATIVE DIGITAL OPTIONS SUCH AS
MOBILE CHECK DEPOSITS. ONE GOOD
EXPERIENCE IS OFTEN ALL IT TAKES.
To assist the credit union members to make better use
of the mobile check deposit option – which represented
a potential savings to the credit union in reduced teller
time and paper check processing – Ideas42 collaborated
with the credit union to design a mailer with easy step-
by-step instructions and a $5 check as an incentive
that also gave them an immediate check with which
to practice. In describing the impact of the mailer and
check sent to 3,000 randomly selected credit union
members who had exhibited little or no use of mobile
check deposit, Ideas42 wrote:
41
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
Not only did this mailer double the rate of adoption for mobile deposits, but the total number of checks members deposited via mobile increased by 40 percent. This change was driven both by a short-term excitement effect over mobile deposits (“look at this cool new technology”) and a long-term adoption effect (“this way of depositing checks is way better”)…. Members only needed a small nudge to try the technology, and sustained use followed suit.”
Some barriers to fintech, and tech in general, disproportionately impact specific segments of the population. As we
discuss earlier in this paper, access to high speed broadband internet services home is less prevalent among certain
sub-populations including individuals living in rural areas, those over 65 years of age, and those making less than
$30,000 a year. And while smartphone ownership is at an all-time high, even among LMI households, limited data
plans and storage capacity on cell phones and mobile devices prevent some consumers from being able to take full
advantage of fintech products and tools.82 For a more detailed understanding of why some consumers do not use
mobile banking and mobile payments, we examine evidence from a Federal Reserve survey administered in 2016 to
non-users (Tables 10 and 11).83
“PLEASE TELL US IF EACH OF THE REASONS BELOW ARE WHY YOU DO NOT USE MOBILE BANKING:”
Response Percent, Except as Noted
Refused/No to All 3%
I’m concerned about the security of
mobile banking
73%
My banking needs are being met
without mobile banking
88%
I don’t see any reason to use mobile
banking
78%
The mobile phone screen is too small 43%
I don’t have a smartphone 27%
My bank charges a fee for using 6%
I don’t do the banking in my 15%
I don’t trust the technology 40%
It’s too difficult to use mobile banking 18%
Number of respondents 819
Table 10.
82 Pew Research Center. “Mobile Fact Sheet.” January 12, 2017. Accessed online: http://www.pewinternet.org/fact-sheet/mobile/83 Board of Governors of the Federal Reserve System. “Consumers and Mobile Financial Services 2016.” March 2016. Tables C43 & C46.
UNC Center for Community Capital
THE POTENTIAL FOR CONSUMER-FACING DIGITAL
TECHNOLOGY TO EXPAND FINANCIAL INCLUSION AND
CAPABILITY FOR UNDERSERVED CONSUMERS
“PLEASE TELL US IF EACH OF THE REASONS BELOW ARE WHY YOU DO NOT USE MOBILE PAYMENTS:”
Response Percent, Except as Noted
Refused/No to All 6%
I’m concerned about the security of
mobile banking
67%
My banking needs are being met
without mobile banking
80%
I don’t see any reason to use mobile
banking
65%
The mobile phone screen is too small 22%
I don’t have a smartphone 36%
My bank charges a fee for using 48%
I don’t do the banking in my 34%
I don’t trust the technology 25%
It’s too difficult to use mobile banking 36%
Number of respondents 1,802
Table 11.
43
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
Table 12.
PEOPLE WITH DISABILITIES
Some consumer groups, such as people with disabilities,
have unique challenges as they adopt new technologies.
For instance, carrying out certain tasks and activities on
a mobile device, such as completing a form or having to
type in information, can be problematic using the small
screen and keyboard on mobile devices and cell phones.
This may pose a particular challenge for people with
certain disabilities, such as visual impairments.
According to recent data from the FDIC, close to half
(46 percent) of households headed by a person with
a disability are un- or underbanked.84 This presents an
opportunity for fintech to help address the specific and
unique financial needs of this community.
Currently, however, many fintech products are not
adequately designed for people with disabilities, and
research shows that the adoption of technology in
general is lower among those with disabilities.
Recent research from the Pew Research Center has
highlighted the disparate adoption rates of technology
between those with and without disabilities (Table 12).
Disabled Americans are less likely to own technology
devices such as computers, smartphones, and tablets.85
People with disabilities are also generally less likely to
use the internet compared to those without disabilities
and they express lower levels of confidence in using the
internet and other communication devices compared to
non-disabled individuals.86
84 Federal Deposit Insurance Corporation. National Survey of Unbanked and Underbanked Households 2015.” FDIC. October 20, 2016. Accessed online: https://
www.fdic.gov/householdsurvey/2015/2015report.pdf85 Anderson, Monica., and Andrew Perrin. “Disabled Americans are less likely to use technology.” Pew Research Fact Sheet. April 7, 2017. Accessed online:
http://www.pewresearch.org/fact-tank/2017/04/07/disabled-americans-are-less-likely-to-use-technology/86 Ibid.
REGARDLESS OF AGE, DISABLED AMERICANS ARE ADOPTING TECH AT LOWER RATES
Age 65+ Ages 18-64
CategoryAny
DisabilityNo
DisabilityDifference
Any Disability
No Disability
Difference
Desktop/Laptop
Computer50% 66% -16% 67% 84% -17%
Smartphone 32% 45% -13% 70% 87% -17%
Home Broadband 36% 57% -21% 66% 80% -14%
Tablet 21% 36% -15% 44% 57% -13%
FIV
E K
EY
IN
VE
ST
ME
NT
S
Nee
ded
to R
ealiz
e th
e Po
tent
ial o
f Dig
ital
Fin
anci
al S
ervi
ces
to
Incr
ease
Fin
anci
al In
clus
ion
THE FIVE KEY INVESTMENTS that need to be made in order to realize the potential that fintech
represents are in the areas of research, non-profit capacity, access to broadband and mobile
technology, regulation, and the security and modernization of the banking system. With a special
focus on fintech innovation within the nonprofit sector, this section highlights examples of successful
development within the field.
1. Expanded Research and Investment on Fintech for the Underserved
While investment in fintech has skyrocketed over the past five years, a greater share of that
investment must be directed towards efforts to ensure that the needs of underserved consumers
are addressed as part of the research and design of new financial products and services. This is
particularly true as incumbent financial institutions are expanding their digital financial services
offerings but may not be at the point where they are benefiting from their cost-savings potiential
yet. For example, in its report on the economic inclusion potential of mobile financial services (MFS),
the FDIC points out that, currently, investments in MFS are primarily additive in nature, meaning
that consumers are still heavy users of other access channels such as visits to bank branch and both
online and telephone banking.87 Thus, rather than saving financial institutions money in the short
term, the addition of MFS is actually increasing their costs and they are challenged to find ways to
cover them. The FDIC goes onto say that:
In addition, as a new delivery channel, MFS is introducing new types of risk and uncertainties into the banking business. In light of investment costs and lack of experience with these services, some banks have focused their initial efforts on delivering MFS to thir more established, profitable and less risky customers. Therefore, current banking business models may not consider the costs and benefits of servicing underserved segments, making early MFS offerings impractical for the underserved (e.g. restricting the use of mobile banking to online banking customers).” 88
Recognizing the need to catalyze and support fintech innovators that cater to underserved
consumers, several organizations have created initiatives that have already broken important
ground. Next, we profile three of them: the Financial Solutions Lab sponsored by the Center for
Financial Services Innovation (CFSI) and JPMorgan Chase & Co., the Common Cents Lab at Duke
University, and Project Catalyst at the Consumer Finance Protection Bureau. Each of these efforts
leverages significant private, public, and philanthropic dollars and expertise. Their goal is to solve the
financial services needs of the underserved in innovative ways with the potential to go to scale.
These efforts also share a commitment to involving consumers in product and services research and
marketing, creating out-of-the-box collaborations, addressing the need for relevant policies and
regulations including those that address consumer protections, applying cutting edge consumer
research such as behavioral economics, and the need to specifically involve innovators and
consumers of color, representatives from diverse geographies, and both women and men in product
design and implementation. Each also understands the value of multiple levels of testing in order
to refine products and services. Given the need for greater understanding of how digital financial
services can meet the needs of the underserved at scale, particularly for specific consumer sub-
segments, we recommend greater investment in these and similar efforts.
87 Burhouse, Susan. Matthew Homer, Yasmin Osaki, and Michael Bachman. “Assessing the Economic Inclusion Potential of Mobile Fi-
nancial Services.” FDIC. P. 20. June 30, 2014. Available online: https://www.fdic.gov/consumers/community/mobile/mfs_qualitative_re-
search_report.pdf88 Ibid. P. 28.
45
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
FIVE KEY INVESTMENTS NEEDED TO REALIZE
THE POTENTIAL OF DIGITAL FINANCIAL SERVICES
TO INCREASE FINANCIAL INCLUSION
FINANCIAL SOLUTIONS LAB
Managed by the Center for Financial Services
Innovation (CFSI) with founding partner JPMorgan
Chase & Co, the Financial Solutions Lab is a
virtual laboratory for fintech companies and other
organizations that utilize technology to improve the financial health of consumers. Combining elements of
accelerators and incubators as well as testing and experimentation, the Lab offers participants financial capital
to grow their early-stage products, opportunities to test aspects of their products, guidance and support for
reaching LMI consumers, and connections to a broad range of advisors and potential partners. A key purpose of
the Lab is to help develop and promote fintech products and services that embrace economic inclusion, build
trust, promote success, and create opportunity while solving important financial challenges that Americans
face. The Lab was launched in 2015, and over a five-year period it will create annual challenges and select the
most innovative solutions for the issue areas highlighted. The products and organizations selected each year
will create a learning cohort, working together for approximately eight months to grow and deepen their
impact for consumers. The first year of the Lab focused on income volatility, the second year focused on
weathering financial shocks, and the third year focuses on a diverse set of tools to improve overall financial
health. To learn more, go to finlab.cfsinnovation.com.
CUTTING EDGE FINTECH TARGETED TO THE NEEDS OF THE UNDERSERVED
Many recognize the potential of fintech to fill gaps in mainstream financial services and ensure access to
affordable, high-quality financial products for the traditionally underserved. Multiple efforts to capitalize on
this potential and boost consumer-friendly innovation are underway. They include incubators and accelerators
to provide funding, guidance, and key connections for fintech startups with a specific focus on meeting
the financial needs of LMI consumers. A number of experimentation labs design, pilot, and refine tools and
mechanisms that may positively influence financial behaviors and decisions for LMI consumers. Additionally,
a range of stakeholder groups including consumer advocacy organizations, policymakers, and regulators are
monitoring the rapidly evolving trends in the fintech marketplace and are working to promote safety and
transparency for consumers. Below are examples highlighting these promising efforts to scale fintech solutions
that increase financial inclusion for all consumers.
47
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
COMMON CENTS LAB
Launched in 2016 with funding from the MetLife Foundation, the Common
Cents Lab creates and tests behavior-based interventions aimed at improving
consumers’ financial well-being. They partner with banks, credit unions, fintech
companies, and nonprofit organizations to design experiments in order to
understand and identify behavior-related financial challenges. They also build and
test prototypes for new financial products and tools that can provide solutions to
help consumers overcome some of these challenges. To date, the Common Cents
Lab has worked with a combination of nearly 30 fintech companies, non-profit organizations, and credit unions.
They have shared their findings through research papers, news articles, and case studies to inform practitioners
and enhance financial products and tools for underserved consumers. To learn more, go to advanced-hindsight.com/commoncents-lab.
THE CONSUMER FINANCIAL PROTECTION BUREAU
The Consumer Financial Protection Bureau’s (CFPB) Project
Catalyst works to encourage safe and consumer-friendly
innovation in financial products and services. It was implemented
in 2012 as a way to fulfil the CFPB’s directive to ensure transparency, efficiency, and competition in the
financial services marketplace. To do this, Project Catalyst acts in three main areas: 1) engaging in research
collaborations and pilot projects with startups to test new and innovative tools or ideas; 2) developing policies
that support and encourage consumer-friendly innovation; and 3) working with diverse stakeholders to open
channels of communication, monitor emerging trends, and identifying potential risks to consumers. Two key
accomplishments to date are the development of a Trial Disclosure Waiver Policy and a No-Action Letter Policy.
The disclosure waiver allows companies with in-market products to test disclosure improvements to benefit
consumers. The No-Action Letter aims to foster consumer-friendly innovation by helping companies manage
regulatory requirements as those requirements attempt to keep pace with the quickly evolving product market,
while also ensuring that companies include specific consumer safeguards. To learn more, go to consumerfinance.gov/about-us/project-catalyst
2. Build Nonprofit Capacity
Capitalizing on the potential for financial technology to expand financial inclusion requires new investment in and
support for nonprofit organizations. This section outlines what is needed, beginning by summarizing the important role
nonprofits can and should play in the financial services ecosystem. Then, we present lessons learned from innovative
nonprofits that have had success with fintech innovations. This section includes five recommendations for nonprofit
organizations themselves and several profiles of nonprofits that are leading the way and connecting fintech with the
needs of the underserved.
FIVE KEY INVESTMENTS NEEDED TO REALIZE
THE POTENTIAL OF DIGITAL FINANCIAL SERVICES
TO INCREASE FINANCIAL INCLUSION
THE ROLE OF NONPROFITS
The role of nonprofits in connecting consumers with
fintech is still emerging. However, it is clear that these
organizations have unique strengths and should be key
players in the sector, most of all because of their
relationships with low- and moderate-income
consumers. Nonprofits can play many different roles:
they can serve as advisors to fintech entrepreneurs and
financial institutions who are building and refining prod-
ucts for the underserved and they can also create new
fintech products and services themselves.
According to an FDIC study of banks’ efforts to serve
the unbanked and underbanked, banks identified their
partnerships with community-based nonprofits as
a key tool for reaching the underserved.89 Financial
institutions should continue to partner with non-profit
intermediaries that can introduce consumers to new
opportunities to improve their financial health while
avoiding options that may be harmful. As one of its
recommendations, the FDIC included the following:
Community outreach through collaborations with community groups was identified as the most effective strategy for developing relationships with these populations. ...Despite this recognition, only about half of all banks reported using
partnerships with organizations to promote opening checking or savings accounts. These findings suggest that banks may benefit from expanding collaborative efforts to promote access to mainstream deposit accounts.” 90
As part of an evaluation of the Financial Solutions Lab,
fintech innovators reflected on their efforts to design
for and market to the underserved.91 Several fintech
startups spoke of their desire to partner with non-profits
for three reasons: 1) to reach their target underserved
market more quickly and, in the case of nonprofits that
work with a large number of clients, to help them to
achieve scale; 2) to work with nonprofits that routinely
work with underserved consumers to better understand
their target market; and 3) to partner with non-profits in
order to engage underserved consumers directly at each
stage – from initial product design to product rollout
to keeping consumers engaged and to later iterations
of product refinement. One interview participant
mentioned that:
There’s an opportunity for [nonprofits] to engage early on in the product development cycle in a way that they can have an impact on the types of products and services that are being developed.
89 FDIC. “2011 Survey of Banks’ Efforts to Serve the Unbanked and Underbanked.” December 2012. P. 4.90 Ibid. p. 7.91 Dorrance, Jess and Lucy Gorham. “Evaluation of the Financial Solutions Lab: Fintech Innovation Challenge 2015.”
49Cataylzing Inclusion: Financial Technology & the Underserved
You’ve got this huge wave of capital and energy and attention being focused in the fintech environment. By engaging with those providers, nonprofits can influence them and really make sure that a lot of those resources are being used to create powerful solutions that really serve the needs of their clientele.” 92
In conversations with a variety of key informants, a
consistent theme that emerged was the importance of
providing opportunities for underserved consumers to
access someone in person. Staff at one nonprofit that
works with younger consumers to help them to manage
their student loan debt said that when they designed
the program, their assumption had been that millennials
would prefer online or at least telephone counseling to
in-person counseling and were surprised to find that the
opposite was true. With so many providers pitching debt
counseling services, some with questionable practices,
even young consumers preferred to be able to meet with
someone face-to-face to reassure themselves that they
were not falling prey to a predatory product or service.
Because nonprofits are viewed as having altruistic
motives, they generally enjoy a higher level of trust with
consumers. Financial institutions and public entities
can partner with nonprofits to provide this level of
personal interaction, instead of duplicating this service.
The higher level of trust enjoyed by the non-profit
community partner, then, can reflect back positively
on the financial institution. However, many community-
based nonprofits are under-resourced both in terms of
staff capacity and access to better technology systems
for tracking impact.
Nonprofits often provide other services that are ripe
for integration with fintech products and services, such
as financial coaching, free income tax preparation,
affordable housing, and workforce development and
training services. When fintech products that can assist
consumers to improve their financial health can be
integrated seamlessly into other programs, the likelihood
of a more robust impact increases. Nonprofits can
also offer users a consistent and easy way to access
information about how to use a product and advice
about what to do when challenges arise. This function
is another benefit for partner fintech providers, whether
they are financial institutions or fintech companies.
LESSONS LEARNED FROM NONPROFITS INNOVATING WITH FINTECH
As the role for nonprofits’ in fintech develops, those
already innovating in this space have begun to share
their experiences and the lessons they have learned as
well as questions and considerations as the field further
evolves. This section includes important considerations
for nonprofits to discuss as they integrate fintech into
their work and examples of nonprofits that have done so
successfully.93
Nonprofits as Fintech Leaders and Innovators
First of all, the same advantages that nonprofits possess
in working with the underserved – an understanding
of their needs, being a trusted source of information
and support, being able to provide services at or below
cost – can also give them advantages in designing
and offering fintech products and services, either
independently or in collaboration with a range of private
and public partners.
Rather than waiting on the sidelines for the private
market to develop solutions to solve the financial
services needs of their constituents, one group of
nonprofits has recently collaborated on a new initiative
called nLIFT (Nonprofit Leaders in Technology). Working
together with the Aspen Insitute, the six partners of
nLIFT hope to amplify the voices and experiences of
nonprofits in expanding financial inclusion through
technology.
A
92 Key informant interview participant, Joshua Sledge of CFSI, spoke with authors in the spring of 2017.93 Sledge, Joshua and Kate Griffin. “Matchmaker, Matchmaker: How FinTechs and Nonprofits Can Swipe Into Great Partnerships.” CFSI Blog Post, November 2016.
Accessed online: http://finlab.cfsinnovation.com/insights/11-2016/matchmaker-matchmaker-how-fintechs-and-nonprofits-can-swipe-into-great-partnerships/
UNC Center for Community Capital
FIVE KEY INVESTMENTS NEEDED TO REALIZE
THE POTENTIAL OF DIGITAL FINANCIAL SERVICES
TO INCREASE FINANCIAL INCLUSION
Building fintech products that truly meet the needs
of LMI households and the underserved requires an
accurate understanding of the day-to-day financial
realities affecting these consumers. How do they make
financial decisions, where are their greatest financial
“pain points,” what factors impact their access to and
use of existing financial services, and what are their
needs, desires, and preferences when it comes to
financial products? It also requires communication.
Consumers need to know that fintech products exist,
have adequate access to the technology necessary
to utilize them, have the knowledge needed to take
full advantage of them, and have trust in the fintech
providers creating and offering these tools.
Nonprofit organizations are uniquely positioned to
play a role in achieving the goal of increased financial
access through fintech. They may do so not only
because of their ability to provide critical information
about LMI consumers to fintech designers, but also by
becoming the designers themselves of fintech tools that
effectively serve the financial needs of their clients and
partners. Nonprofits are also able to address some of
the key barriers impacting consumer take-up of fintech
products due to their status as a trusted provider to LMI
consumers.
Recognizing this meaningful opportunity, six leaders
from the nonprofit sector came together to create
nonprofit Leaders in Financial Technology (nLIFT)
to support one another in the goal of increasing
financial inclusion through the use of technology. The
organizations include:
COMMONWEALTH strengthens the financial opportunity
and security of financially vulnerable people by
discovering ideas, piloting solutions, and driving
innovations to scale.
As the nation’s leading microsavings provider, EARN
designs and launches online savings tools that create
financial stability for America’s most economically
vulnerable populations.
The mission of the NATIONAL FEDERATION OF
COMMUNITY DEVELOPMENT CREDIT UNIONS is to help
low- and moderate-income people and communities
achieve financial independence through credit unions.
NLIFT: BRINGING THE STRENGTHS OF THE NONPROFIT SECTOR TO BEAR IN THE DESIGN AND DISTRIBUTION OF FINANCIAL TECHNOLOGY
51
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
THE FINANCIAL CLINIC builds working poor families’
and individuals’ financial security by addressing their
immediate financial challenges and helping them set
long-term goals to achieve financial mobility.
MISSION ASSET FUND is a nonprofit organization
on a mission to create a fair financial marketplace
for hardworking families through savings and credit
building opportunities.
MY PATH designs, tests and scales models that
support cities, youth employment programs and
financial institutions to build economic pathways for
youth.
Each of the nLIFT members is building a product or
platform that can be used by consumers directly or
in partnership with other organizations. For example,
EARN has created an online and mobile Starter
Savings Program that is offered directly through the
EARN website, but the program can also be offered
in partnership with other organizations through a
customized webpage.
While each organization remains faithful to their
individual mission, by working together, nLIFT members
are also creating a stronger shared voice around their
collective goal. nLIFT is committed to making the
highest and best use of both private and philanthropic
capital, as well as leveraging the potential of cross-
sector partnerships to maximize impact. According
to nLIFT “As tax-exempt organizations, we have the
privilege and responsibility to prioritize social return
above — and often even at the expense of — financial
return. This special role demands we cultivate special
expertise, public awareness, strategies, and peer
support.”
“AS TAX-EXEMPT ORGANIZATIONS, WE HAVE THE
PRIVILEGE AND RESPONSIBILITY TO PRIORITIZE
SOCIAL RETURN ABOVE — AND OFTEN EVEN AT THE
EXPENSE OF — FINANCIAL RETURN. THIS SPECIAL
ROLE DEMANDS THAT WE CULTIVATE SPECIAL
EXPERTISE, PUBLIC AWARENESS STRATEGIES, AND
PEER SUPPORT.”
UNC Center for Community Capital
Build, Buy, or Partner
Second, nonprofits considering the incorporation
of financial technology into their services need to
determine the following: 1) do they buy an existing
product or tool from a vender that they can use to serve
their own or their clients’ needs; 2) do they partner with
a fintech company, a financial institution, or another
third party collaborator that offers fintech products and
services (including referring clients to existing fintech
products and services); or 3) do they build their own
tool. Each of these paths requires careful deliberation
regarding why, how, and if fintech is the most effective
mechanism for achieving organization goals and serving
clients.
Nonprofits beginning to explore these options must
answer an array of fundamental questions as follows:
What unmet need is the nonprofit addressing? Is the nonprofit the best organization to address it?
Are fintech tools an answer to this need? If yes, how would a fintech product or tool enhance the way the organization services its clients?
How does the integration of fintech into current service delivery fit with the organization’s overall mission? How will it fit, logistically, into current operations?
Does the organization have the staff capacity and other resources needed to add fintech into its services, particularly if it builds a product or tool itself? What additional staff training might be needed? Where can it find design and other expertise to build a product or tool?
What would the design and ongoing maintenance costs be? Would the product or tool be offered to other organizations? How would the ongoing technical assistance costs of offering services to outside organizations be sustained?
What is the ongoing business model for sustaining the initiative? What are the assumptions about the role of private, public, and philanthropic dollars, as well as the potential for both organizational and client users to contribute something to ongoing costs?
FIVE KEY INVESTMENTS NEEDED TO REALIZE
THE POTENTIAL OF DIGITAL FINANCIAL SERVICES
TO INCREASE FINANCIAL INCLUSION
Vetting Fintech Products and Partners
Third, vetting is a critical issue if a nonprofit is seeking
to partner with a fintech company or refer their clients
to existing products. Nonprofits must determine which
of the many products on the market can offer their
clients safe and affordable tools to help them meet
their financial needs. Given the high speed at which
new fintech products are being introduced, it becomes
difficult to keep up with what each tool does and how
any one may be similar or different from another. Vetting
a product requires much more in terms of knowing
and understanding how the company operates, how it
generates a profit (for example, do customers pay to
use the product), whether the terms of use are clear and
transparent, how they protect customer data, if they are
FDIC insured (when applicable), and importantly, if the
company will even remain in business. Unfortunately, it is
not uncommon for early-stage startups to fail, and being
able to vet a product becomes essential for a nonprofit
working to effectively serve their clients and maintain a
trusting relationship with them.
For Catalyst Miami (highlighted in more depth on pages
54 and 55) vetting financial apps prior to recommending
them to their financial coaching clients remains one of
their highest priorities. Their process includes having
financial coaches utilize each product themselves and
become familiar with the functionality, the ease of use,
the benefits and limitations in order to determine which
ones might best fit their clients’ financial needs. In
some cases, coaches have talked directly with fintech
companies to ask questions about their business model
or about the product prior to recommending something
to a client. As Catalyst has discovered, however, the
vetting process is ongoing. Coaches must continue to
monitor financial apps since new ones are frequently
introduced, and the features of existing ones may
change over time. They must be able to stay abreast
of a quickly changing market and to adjust their
recommendations when necessary.
In addition to nonprofits and consumers vetting
products through their own processes, some nonprofit
leaders, funders, and those working in the fintech
sector have suggested the possibility of a type of
B C
53
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
central clearinghouse where both nonprofits and
fintech companies can share essential information
and create opportunities for collaboration. There is
a need for a systematic way to vet fintech providers
and products and build a bridge between nonprofits
and fintech companies. As a step in this direction, the
Financial Solutions Lab has been working to make key
connections between fintech innovators targeting LMI
consumers and the nonprofits serving that population.
Furthermore, they include nonprofit innovators in the
FinLab that are developing and scaling their own fintech
products.
Integrating Technology into Existing Services
Fourth, the integration of technology into service
delivery can provide a way to enhance how a nonprofit
serves its clients. Through automation and streamlining,
fintech can offer an opportunity to serve more clients
more efficiently and cost effectively. Technology,
however, should not act as a replacement for existing
services. Research continues to point out that consumers
need and want opportunities to interact with people,
not machines, particularly when questions arise or when
they encounter a problem that requires an individualized
response or solution.94 One-on-one interactions are also
essential to building and maintaining relationships with
clients and customers in ways that cannot be easily
replaced or replicated through technology.
Here, we provide three examples of nonprofits
integrating fintech into their existing work. Then we
provide more in-depth profiles of innovations in the field:
Catalyst Miami, EARN, Prize Savings, and a collaboration
between Neighborhood Trust Financial Partners and the
Federation called the Pathways Initiative.
EXAMPLES FROM THE FIELD
When the National Foundation for Credit Counseling
began its initiative to provide counseling on student
loan debt, it anticipated that its young and largely
tech-savvy clientele would prefer online tools or
telephone counseling. Instead, they found that even
millennials preferred to come to the office and meet with
someone in person before they divulged the details of
their financial lives.95 One-on-one interactions are also
essential to building and maintaining relationships with
clients and customers in ways that cannot be easily
replaced or replicated through technology.
Catalyst Miami identified an opportunity to enhance
their coaching services with the inclusion of financial
apps. These apps offered the coaches a new way to
engage with their clients and to keep them moving
forward on the path towards their financial goals they
set for themselves outside of their standard coaching
sessions. In many cases, the apps also created a new
data source to track a clients’ progress on their goals in
ways that had not been previously accessible. All of this
augments, but does not replace the personal interaction
that is the basis of an effective coaching relationship.
For nonprofits building their own tool, the integration
of technology can allow opportunities to learn from
the fintech/startup sector about how they develop
and deliver their programs and services. For example,
Neighborhood Trust Financial Partners (NTFP), a 2015
Financial Solutions Lab winner with their fintech product
called PayGoal, embraced many elements of the Lean
Startup model. Their product development process was
guided by three main principles. First, build a prototype
product experience intended to test a small number of
hypotheses regarding user response to the tool. Next,
activate the product, onboard users, and measure
results. Third, reflect on learnings and move forward with
a high degree of confidence to build the next iteration.
NTFP’s approach blends principles from a variety of
prominent product design methodologies, including
the “Build – Measure – Learn” loop of the Lean Startup
Model and Human-Centered Design.96 In response to the
needs of their customer base and a desire to scale their
efforts, NTFP now partners with the fintech company
FlexWage. FlexWage offers employers an innovative
employee benefit that allows employees to borrow
against accrued wages, thus giving them additional
liquidity as an alternative to high-priced options such as
payday loans.
94 See, for example, the following research: 1) Marques, Denise., and Stacey Kest. “The FinTech Project Final Report On Evaluation Activities and Findings.”
University of Miami. January 2017. P. 21.; 2) National Federation of Community Development Credit Unions. “From Distrust to Inclusion: Insights into the Financial
Lives of Very Low-Income Consumers.” January 2015.95 Interview with Ann Estes and Jeffrey Faulkner, National Foundation for Credit Counseling, Washington, D.C.96 Ries, Eric. The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. Crown Publishing Group. 2011.
D
FIVE KEY INVESTMENTS NEEDED TO REALIZE
THE POTENTIAL OF DIGITAL FINANCIAL SERVICES
TO INCREASE FINANCIAL INCLUSION
According to a recent census, the field of financial coaching
includes over 450 programs providing coaching services across the U.S.97 One of these is Catalyst Miami, which offers a
range of services, including financial coaching, to improve the financial and physical health of families and communities
in Miami-Dade County in Florida. A key part of their mission is to build the financial wellbeing of households
and communities by offering services such as free tax preparation, credit building and saving opportunities, and
comprehensive financial coaching.
Financial coaching assists individuals to achieve improved financial security and well-being. Although various definitions
of financial coaching exist, it is typically understood to incorporate a few key elements. These include identifying a
financial goal, developing an action plan to achieve it, and following through on that plan.98 All of this is done with
the assistance of a coach to guide and support each stage of the process. Coaching is distinguished from financial
counseling, another approach to enhance financial security, by being primarily client-driven rather than prescriptive, and
working towards a goal rather than addressing a more immediate financial crisis.99
Over the last decade, financial coaching has evolved from a fledgling approach to a professionalized field.100 A recent
element in this evolution is the inclusion of technology into the delivery of coaching services. There are multiple ways
technology can enhance financial coaching – from virtual meetings (through Skype or Google Hangouts, for example)
to text messaging used for appointment reminders or informal communication between coach and client to online
platforms to deliver coaching content and resources.101 At Catalyst, coaches have begun to use fintech apps to enhance
their coaching sessions and increase engagement with clients as they work towards their financial goals. Catalyst
recognized that traditional banks were not necessarily meeting their clients’ needs and felt they had an opportunity.
Catalyst’s Chief Executive Officer, Gretchen Beesing, stated, “…traditional banking does not meet all of the needs of our
client base, so here’s an opportunity to test new things, see how it can enhance our coaching model. And our coaching
team was eager to incorporate fintech apps, they loved it, started playing with the apps right away when they became
available, and so we went from there.”
Catalyst Miami approaches its work with innovation and experimentation in mind. Additionally, they have an office co-
located at Miami-Dade Community College and a large number of their clients are young and tech-savvy. These two
pieces together made the incorporation of technology into their services fairly smooth and felt like a logical extension
of their mission.
97 This number reflects the number of responses to the census. There are likely more organizations offering coaching services that did not participate in the
census. Lienhardt, Hallie. Financial Coaching Census 2016. Asset Funders Network and Center for Financial Security. Accessed online: http://assetfunders.org/
ages/pages/AFN_Financial_Census_Brief_2016.pdf98 Collins, J. Michael, & O’Rourke, Collin. The Application of Coaching Techniques to Financial Issues. Journal of Financial Therapy, 3 (2) 3. Accessed online: https://
doi.org/10.4148/jft.v3i2.165999 Ibid.100 The Cities for Financial Empowerment Fund. The Professionalizing Field of Financial Counseling and Coaching: A Journal of Essays from Expert Perspectives in
the Field. http://www.professionalfincounselingjournal.org/assets/cfe-fund-professionalizing-field-of-financial-counseling-and-coaching-journal2.pdf101 Collins, J. Michael., & Lienhardt, Hallie. Using Technology in Financial Coaching. Center for Financial Security. Issue Brief 2014‐6.1 Accessed online: http://fyi.
uwex.edu/financialcoaching/files/2014/06/tehnology-in-coaching_6_20141.pdf.
55
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
Along the path to integrating fintech tools into their services, Catalyst has discovered some important lessons that
include the following:
Financial apps are a supplement to enhance coaching. Apps act as a tool for helping clients reach their goals, but the coaching relationship remains central to the experience with clients.
Initial vetting of apps is critical. For Catalyst, this means that coaches test out apps to assess functionality, ease of use, versatility, etc. Often, coaches are using the apps themselves well before suggesting them to their clients. In some cases, coaches even reach out to app developers directly to obtain additional information about the app and its viability.
Having a model for how and when you introduce an app to clients matters. Building trust and rapport between coach and client is essential, and must happen prior to introducing an app for the client to consider. In talking with a Catalyst coach, he expressed concern about presenting an app too early in a coaching session. He explained:
For me and for our coaches, we tend not to do it [introduce an app] at the beginning of the session, only because that’s most of the relationship building. It’s that building trust part of it. You’re really just hearing people’s stories, and active listening, and that’s where you build the trust, and you don’t want to seem like you’re selling something when you’re presenting a valuable tool.”
A guided onboarding with a coach can ease the sign-up process. Coaches typically review and download an app with a client during a coaching session and work with them to complete the sign-up process. This guided onboarding allows clients to ask questions or deal with issues that may have otherwise prevented them from enrolling. Before ending a session, coaches often assign “homework” related to the app, which increases engagement with the app and the coaching sessions more generally.
Offering clients too many apps may be counterproductive. Consistent with some behavioral research which suggests that too many choices can overwhelm consumers, coaches typically suggest only a few apps for a client to consider using. Additionally, many of Catalyst’s clients have limited storage space on their phones which impacts the number of apps that can be downloaded on their device. Coaches are careful and deliberate in their app suggestions to best match clients’ needs while keeping in mind other potential constraints.
Coaches must monitor changes in apps to keep clients informed on an ongoing basis. While incorporating existing fintech apps into coaching services can be an inexpensive added value in terms of program costs, coaches must be willing and able to devote time - in addition to their already demanding schedules - to monitoring changes or upgrades to apps in order to keep clients informed. In some cases, changes to an app may require that coaches and clients re-evaluate if the app remains a good fit towards achieving their goals. For example, if an app was offered free-of-charge when a client started using it, but now charges a monthly fee, coaches and clients can work together to determine if the client should continue utilizing the app and what their other options might be.
Practitioners must strike a balance between automation and individual in-person interactions. While fintech may provide a mechanism to streamline, or even automate, aspects of financial coaching, clients still rely on direct, in-person interactions with a coach. This is a potential area of future research to determine where and how technology can best enhance coaching services without stripping away the most critical component of the coaching experience.
Savings proving a critical foundation for economic security and prosperity, but
nearly half of Americans (46 percent) report that they would have difficultly
coming up with $400 to cover a financial emergency.102 EARN, a California-
based nonprofit, has been working to change that statistic for over fifteen
years, by providing opportunities for LMI households to build up small amounts
of savings (microsavings) over time in order to bolster in their overall financial
health.
EARN is also one of a small number of nonprofit organizations utilizing technology to further their mission, while
simultaneously helping to shape the future of the fintech sector. Their Starter Savings Program, which allows users to
link their savings account through a mobile-optimized platform and earn rewards for making savings deposits, was
created in large part because of their desire to incorporate technology into their service delivery model and to help
scale their interventions to increase impact.103
Key to EARN’s success is the use of client feedback to design their products and tools. EARN listens closely to what
their clients say they need and, as a result, clients view them as a trusted provider of those services. This relationship
with clients is one of the most powerful ways in which nonprofits can influence the impact that fintech can have on
expanding economic opportunity for LMI households.
Other keys to EARN’s success are the willingness to experiment and to test new ideas to best meet their clients’
needs, and then rigorously track metrics that can guide their future work and product development. In describing
their approach, Leigh Phillips, the CEO at EARN, stated, “I think that being able for us to come out and say, first off,
nonprofits do technology, we can do technology, and we should do technology because it’s 2017 and that’s where the
world is going. We share our learnings about what works and what doesn’t, and encourage others to do the same, to
develop a shared voice around consumer advocacy in the financial technology space.”
EARN is partnering with a wide variety of organizations to attract new members and is constantly considering new
ways to bring them greater value, including resources for those who want to manage their financial lives better but may
not be in a position to start saving yet. They feel that one of their greatest successes is that with this new application of
technology, they are still attracting their target market of members who are low-income, women, diverse in age, and a
majority of whom are people of color. One of their most productive collaborations has been with FreshEBT – an app to
help consumers to manage their nutrition assistance (SNAP) benefits – another fintech innovator. The EARN/FreshEBT
partnership demonstrates the strength of nonprofit and for-profit fintech startups utilizing each of their strengths
towards a a common goal.
FIVE KEY INVESTMENTS NEEDED TO REALIZE
THE POTENTIAL OF DIGITAL FINANCIAL SERVICES
TO INCREASE FINANCIAL INCLUSION
Tracking Data and Measuring Impact
Finally, nonprofits must consider how to measure the
impact that fintech is having on their clients and their
mission. As one interview participant pointed out, “one
of the wonderful things about financial technology is
just the amount of data and information that’s flowing
through instantaneously. We don’t have to sit around
and wait six months to see if something really worked
before we can go back and decide to change things.”
With this data comes the need to know both what to
measure and how to use that information to assess
whether goals (both for clients and for the organization
more broadly) are met and when or how systems may
need to be adjusted based on what is learned. The field
would benefit, however, from greater uniformity in how
impact is measured and which metrics are utilized, an
issue that has been recognized and is being addressed
by many key players as the field evolves.
E
102 Board of Governors of the Federal Reserve System. “Report on the Economic Well-Being of U.S. Households in 2015.” May 2016. 103 For every $20 someone saves per month, they earn a $10 monthly saving bonus, over a period of six months. Users can select a specific savings goal and use
the tool to track their progress. Currently, over 5,000 have registered for the savings program and linked their bank account to the app.
57Cataylzing Inclusion: Financial Technology & the Underserved
A creative new initiative by giant retailer Walmart and nonprofit financial
innovator Commonwealth takes advantage of two seemingly disparate
consumer sentiments – the preference for savings and the attraction of
lottery winnings as a wild card means to financial stability. The program,
called Prize Savings, utilizes the savings vault on the Walmart MoneyCard.
The reloadable MoneyCard doesn’t require a linked checking or savings
account, making it suitable for the unbanked. For each dollar saved in the
Vault, cardholders receive a chance to win one of 500 monthly prizes – one for $1,000 and the remaining for $25 – that
are deposited directly onto their card.
Even in relatively small amounts ($250 to $749), savings can help households avoid eviction, avoid missing a housing
or utility payment, and avoid relying on public benefits when faced with a disruption in income or an unexpected
expense.104 Unfortunately, income disruptions are common – striking roughly 1 in 4 households over a year in one study
– and a significant share of households lacks a savings cushion.105 While the lack of a savings cushion isn’t confined to
low- and moderate-income households or to the unbanked or underbanked, not having a checking or savings account
increases the challenge of developing a savings habit, as does income volatility.
As a result of these challenges, many households feeling that saving is unrealistic. One survey by the Consumer
Federation of America showed that for those with less than $35,000, 40 percent felt the best way to save $500,000
over a lifetime (think retirement savings) was to win the lottery.106 And the allure of the lottery is strong – in 2014,
Americans spent $70 billion on lottery tickets despite losing roughly half of each dollar spent.107
While the program is relatively new, consumer interest has been strong, with significant increases in vault usage
and average savings.108 And while the program may not be perfect (the MoneyCard comes with fees similar to many
prepaid cards, for example), if it can capture even a fraction of they money spent on lottery tickets every year and help
households to avoid the large calamities that often originate in the lack of a few hundred dollars in emergency funds, it
will be a wild success.
104 McKernan, Signe-Mary., Caroline Ratcliffe, Breno Braga, and Emma Kalish. “Thriving Residents Thriving Cites: Family Economic Security Matters for Cities.”
Urban Institute. April 2016. P. 2.105 Ibid.106 Los Angeles Times. “Many See Lottery as a Better Bet Than Saving and Investing.” October 29, 1999. Accessed online: http://articles.latimes.com/1999/oct/29/
business/fi-27451 107 Walker, Rob. “How to Trick People Into Saving Money.” The Atlantic. May 2017. Accessed online: https://www.theatlantic.com/magazine/archive/2017/05/how-
to-trick-people-into-saving-money/521421/ /108 Ibid.
Beyond these important considerations for nonprofits,
there is a fundamental shift needed in the funding
structure of fintech in order to adequately support
nonprofits in helping to transform a somewhat disjointed
system of separate players into a more collaborative
ecosystem that maintains a focus on consumers. For
many nonprofit financial services providers, including
credit unions, resources to upgrade or replace existing
systems are inadequate to fully scale the incorporation
of fintech into their services as well as to track impact at
optimal levels.
Simply including nonprofits in the field is not enough.
Tighter connections and deliberate collaborations
between fintech developers, incumbent financial
services providers, nonprofit organizations, researchers,
consumer advocates, and policymakers are all needed
to make this transformation a success. Foundations and
private capital investments must lead the way.
UNC Center for Community Capital
FIVE KEY INVESTMENTS NEEDED TO REALIZE
THE POTENTIAL OF DIGITAL FINANCIAL SERVICES
TO INCREASE FINANCIAL INCLUSION
59
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
The Pathways to Financial Empowerment initiative is a software
platform and technical assistance program designed to provide
credit unions with the technology and training needed to
deliver high-quality financial counseling and coaching to their
membership. Pathways is a joint initiative of the National
Federation of Community Development Credit Unions
(Federation) and Neighborhood Trust Financial Partners. The
Federation is a Community Development Financial Institution
(CDFI) intermediary and trade association with a membership
of 200+ credit unions in 46 states that provides technical
assistance, advocacy, capacity building, and programmatic
support to credit unions committed to low-income communities.
Neighborhood Trust provides a wide array of financial
empowerment services to New York City residents and has
over twenty years of experience providing financial counseling
in credit union branches and across other sites and channels
throughout New York City.
At the heart of Pathways is a customized cloud-based platform that provides financial counseling and coaching
client management and robust outcome measurement features. Ann Solomon, Director of Strategic Initiatives at the
Federation says, “Pathways provides credit unions with a new tool to quantify their impact on individuals’ financial well-
being in a way they haven’t been able to do before.”
This database offers user-friendly screens that financial counselors use throughout their face-to-face sessions with
clients to input data and guide their work. In addition to the data collected from the client throughout the session,
the counselor can also order a client’s credit report and automatically integrate data from that report into the client’s
record, preventing the counselor from needing to enter data manually. Another helpful tool that Pathways offers is
“nudge” text reminders, designed to follow-up with clients about the actions steps that they committed to in previous
counseling sessions. These automatically generated reminders provide an extra layer of consistent support and
accountability for clients without having to commit any additional staff time. But perhaps the most unique element of
the Pathways platform is its ability to integrate credit union account level financial data with the financial counseling
session data, allowing for robust data outcome measurements such as product uptake and asset balance, as well as
changes in credit score and debt levels to achieve a comprehensive view of the of the client’s financial well-being over
time.
These robust data collection and analysis functions provide valuable information for the counselors to share with
their clients as well as for the credit union to be able to measure their programmatic outcomes. Five credit unions
participated in the Pathways pilot program, launched in October 2015 with seven more joining in in the 2016-2017
program year. Early impact data from the initial cohort have shown promising results. Sixty percent of the nearly 1,000
people served in the first year of the program achieved one or more financial goals and 40 percent took up a new
product with their credit union, ranging from savings accounts to auto loans. For clients engaged in counseling for at
least four to six months, 29 percent increased their savings and 61 percent improved their credit score, including 13
percent who improved their credit category. As the Pathways program grows, the Federation and Neighborhood Trust
continue to measure and illustrate that credit union counseling, integrated with appropriate financial products, has a
positive impact on individuals’ financial well-being.
UNC Center for Community Capital
FIVE KEY INVESTMENTS NEEDED TO REALIZE
THE POTENTIAL OF DIGITAL FINANCIAL SERVICES
TO INCREASE FINANCIAL INCLUSION
3. Increase Access to Broadband and Mobile Technology
In examining the profiles of the unbanked and underbanked, we find that the same demographic groups with the least
access to broadband technology and smartphones (those who are low-income, rural, less-educated, and Black or
Hispanic) also have higher rates of being underbanked and unbanked. Additionally, in the case of mobile technology,
they are more likely to use mobile banking if they own a smartphone. Thus, in order to take advantage of the potential
for digital financial services to expand financial inclusion, efforts to make both technologies universally available are
needed.
One effort to increase internet access has been the
federal Lifeline program, which since 1985 has been
helping low-income Americans obtain phone service and
later to obtain internet access with the help of subsidies.
The initial rationale – that all households needed access
to phone service in order to participate in society and
the economy in a meaningful way, such as being able to
apply for jobs, receive emergency medical services and
information – also applies to internet access.
The push now is for expanded broadband access, since
it is essential for accessing web-based employment
applications, public benefits forms, and income tax
filing websites. And while we are aware that the Lifeline
program has been criticized over the years and has not
been without hiccups, the original premise and rationale
for the program remain sound and improvements should
be pursed aggressively.
4. A Balanced Regulatory Landscape that Protects Consumers and Supports Innovation
The issues surrounding financial regulation, fintech innovation, non-bank financial services providers, financial system
soundness, and consumer protection are both critical and complex. However, as noted in our earlier discussion of the
growth and consumer adoption of digital financial services in the United States compared to elsewhere around the
globe, countries such as the United Kingdom and Sweden have developed banking regulatory systems that analysts
characterize as being friendly to fintech innovation. These regulatory regimes are also viewed as giving countries
a potential advantage in attracting fintech investment capital. An additional attraction of operating under these
regulatory contexts from the financial services provider side is that they are typically centralized under one authority
and national in scope, in comparison to the United States where multiple agencies oversee the industry and many
financial institutions operate under state charters with associated banking regulations that can vary across 50 states.
But while the American banking regulatory framework
may be in need of reform in order to support innovation,
its responsibilities in ensuring the safey and soundness
of the financial system and in protecting consumers
are paramount. And while many fintech innovators
and non-bank entities provide products and services
advantageous to the underserved, consumer advocates
note that others have taken advantage of the current
regulatory regime’s ambiguity about some new types of
products and services.
Some bad actors have charged consumers exorbitant
fees and interest rates that advocates contend are
at predatory or near-predatory levels. An additional
concern is that changes to federal regulations and the
way that regulatory agencies operate could provide
an opening for financial services providers to avoid
regulations put in place by state regulators, thus
weakening consumer protections. Positive change in this
arena will take expertise and caution.
Federal regulatory agencies such as the FDIC and
Consumer Financial Protection Bureau have expressed
concern about the need for an updated set of
regulations that ideally could embody the best of both
worlds – strong consumer protections and the flexibility
to catalyze innovation, especially innovation that
addresses the unmet needs of underserved consumers.
The complexities involved and the diversity of interests
pressing their point of view guarantee that this will not
be an easy task to accomplish but, if done well, the
greater certainty for both innovators and consumers
will ultimately help the financial services industry to
maximize its creative potential to deliver better products
at an affordable cost.
61Cataylzing Inclusion: Financial Technology & the Underserved
5. Modernization & Increased Security
Consumers consistently cite their concerns about the security of fintech products as a reason why they are reluctant
to adopt digital financial services. A second reason for reluctance to utilizie mainstream financial services as opposed
to cash is the length of time between when a check is deposited and when the funds are posted to the account and
available to use. Consider a consumer who gets paid the last day of the month but must pay rent and utilities the
following day on the first day of the month. Waiting even three days for a paycheck to clear is not a viable option.
According to the United States Federal Reserve,
“Businesses and consumers have expressed a demand
for faster payments and could benefit from the prompt
visibility of payment status and faster availability of good
funds. Uncertainty in payment timing and delay of funds
receipt can be costly to consumers and businesses as
they manage their account balances from day to day.”109
Building a faster payments system would not only
address some of the cash flow issues of many
consumers, but would also present an opportunity to
increase the safety and security of the system. Again
according to the Federal Reserve:
As new faster payments solutions are developed or integrated with existing systems, safety and security features can be
built from the ground up based on today’s knowledge of vulnerabilities in payment systems as well as any anticipated risks specific to payment speed and finality. If proper controls are in place, …faster payments solutions can improve payment safety and security and reduce the risk for various parties involved in a transaction.” 110
Improving the U.S. payments system will not be an
easy task, as multiple players and systems that are
currently fragmented must be brought together and
coordinated. But, to ignore this pressing need risks
further fragmentation and could even diminish the
United States’ competitive advantage.
109 Federal Reserve. “The U.S. Path to Faster Payments: Final Report Part One: The Faster Payments Taskforce Approach. January 2017.110 Ibid.
UNC Center for Community Capital
TITLE
63
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
CO
NC
LU
SIO
N
The growth of fintech and the increasing adoption of digital financial
services by consumers introduces new opportunities to increase access
to financial services. However, a significant expansion of financial
inclusion is not an inevitable outcome. Making fintech a true catalyst for
change requires new and significant investments and commitment from
a broad range of private, philanthropic, nonprofit, public, and regulatory
institutions and actors across the financial services ecosystem.
By synthesizing research from every corner of the field and establishing
an overview of low- and moderate-income consumer needs, this
paper identifies both the barriers and the opportunities facing fintech
providers. Additionally, it outlines areas of needed investment that,
collectively, would open up greater access to and use of digital financial
services for the financially underserved. These investments would also
create new opportunities for the underserved to articulate their own
needs and be involved in designing appropriate innovations in response.
Even more, they could address the concerns of both providers and
consumers related to system speed and security, ensure adequate
consumer protection, and increase the capacity of a range of nonprofit
and other intermediary institutions that are key partners in providing
the underserved with the high-quality and affordable products and
tools they need to maintain or improve their financial health.
This report also profiles a variety of promising initiatives that illustrate
the sorts of innovative cross-sector collaborations needed to reach the
underserved in new ways. Currently, the scale of such initiatives remains
inadequate compared to the need. This is, in part, because these
initiatives are still emerging but, more fundamentally, it is because they
require greater resources and further integration into major private and
public systems and institutions.
Fortunately, critical players across the financial services landscape are
already articulating the required expertise and vision. Our hope is that
what many describe as the “fintech revolution” will provide the basis
for a deeper revolution in financial inclusion and health that so many
families and communities desperately need.
UNC Center for Community Capital
Accenture Consulting. “2016 North America Consumer
Digital Banking Survey.” 2016.
__Banking Change Survey 2017. 2017.
Adler, Joe. “Regulatory Concerns Strain Bank-Fintech
Relationship.” American Banker. September 25, 2015.
American Banker. “The Future for Bank Branches: How
can bank branches reinvent themselves in the era of mo-
bile.” Verizon. (n.d.).
Anderson, Monica., and Andrew Perrin. “Disabled Amer-
icans are less likely to use technology.” Pew Research
Fact Sheet. April 7, 2017. Accessed online: http://www.
pewresearch.org/fact-tank/2017/04/07/disabled-ameri-
cans-are-less-likely-to-use-technology/
Armstrong, Tony. “The Cost of Being Unbanked: Hun-
dreds of Dollars a Year, Always One Step Behind.” Nerd-
Wallet Blog Post. Accessed online: https://www.nerdwal-
let.com/blog/banking/unbanked-consumer-study/
Arner, W. Douglas., Janos N. Barberis, and Ross P.
Buckley. “The Evolution of Fintech: A New Post-Crisis
Paradigm?” October 20, 2015. Accessed online: https://
papers.ssrn.com/sol3/Papers.cfm?abstract_id=2676553
Arsene, Codrin. “10 Fintech Companies Giving Banks a
Run for their Money.” Y Insights. March 16, 2017. Accessed
online: https://ymedialabs.com/top-10-fintech-compa-
nies/
Asatryan, Diana. “Credit Karma’s Revenue is Skyrocketing
Thanks to Its Free Products.” Bank Innovation. June 29,
2017.
Asrow, Kaitlin and Beth Brockland. CFSI’s Consumer
Data Sharing Principles: A Framework for Industry-Wide
Collaboration. Center for Financial Services innovation.
October 2016.
Binham, Caroline. “UK regulators are the most fin-
tech friendly” Financial Times. September 12, 2016.
Accessed online: https://www.ft.com/content/ff5b-
0be4-7381-11e6-bf48-b372cdb1043a?mhq5j=e1
Beck, Dave. “Emerging Payment Alternatives for the
Unbanked and Underbanked.” Federal Reserve Bank of
Richmond. September 24, 2015.
Bhattacharyya, Suman. “How financial tech startups are
reaching out to low-income Americans.” Digiday. Febru-
ary 10, 2017. Accessed online: https://digiday.com/mar-
keting/are-low-income-can-americans-the-new-market/
Board of Governors of the Federal Reserve System. “Con-
sumers and Mobile Financial Services 2014.” March 2014.
__Consumers and Mobile Financial Services
2015. March 2015.
__Consumers and Mobile Financial Services
2016. March 2016.
__Report on the Economic Well-Being of U.S.
Households in 2015. May 2016.
__Report on the Economic Well-Being of U.S
Households in 2016. May 2017.
__The U.S. Path to Faster Payments: Final
Report Part One: The Faster Payments Task Force Ap-
proach. January 2017.
Burhouse, Susan., Benjamin Navarro and Yazmin Osaki.
“Opportunities for Mobile Financial Services to Engage
Underserved Consumers: Qualitative Research Findings.”
FDIC. May 25, 2016.
Burhouse, Susan., Matthew Homer, Yasmin Osaki, and
Michael Bachman. Assessing the Economic Inclusion Po-
tential of Mobile Financial Services. FDIC. June 30, 2014.
Burr, Elliot. The Fintech World Series: Sweden. Kurtosys.
May 10, 2017. Accessed online: https://blog.
kurtosys.com/the-fintech-world-series-sweden/
Capgemini and LinkedIn. “World FinTech Report 2017.”
Accessed online at: http://www.fintech.finance/wp-con-
tent/uploads/2016/11/world_fintech_report_2017.pdf.
Center for Financial Services Innovation. “About Us.” CFSI
Finlab. 2016. finlab.cfsinnovation.com/about-us/.
RE
FE
RE
NC
ES
65
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
CFA Institute. “Fintech Survey Report.” April 2016.
Center for Financial Services Innovation and Core Inno-
vation Capital. “Financial Technology Trends in Under-
banked Market.” May 2013.
CGI Group Inc. Financial Consumer Demands for Tomor-
row’s Digital Bank. 2015.
__FinTech Disruption in Financial Services: A
Consumer Perspective. 2016.
Chatterjee, Shreya. “Digital Financial Services: India Stack
and its Role in Financial Inclusion.” IFMR Lead. 2016.
Chui, Michael., et al. “The social economy: Unlocking
value and productivity through social technologies.”
McKinsey Global Institute. November 2012.
Citi GPS: Global Perspectives and Solutions. “Digital
Disruption: How FinTech is Forcing Banking to a Tipping
Point.” March 2016. P 4.
__ “Digital Disruption- Revisited: What FinTech
VC Investments Tell Us About a Changing Industry.” Jan-
uary 2017.
Cohen, Nicki., et al. “Reimagining Financial Inclusion.”
Oliver Wyman and Ideas42. (n.d.).
Collins, J. Michael., and Collin M. O’Rourke. The Applica-
tion of Coaching Techniques to Financial Issues. Journal
of Financial Therapy, vol. 8, no. 2, 2012, P. 39-56. Ac-
cessed online: https://doi.org/10.4148/jft.v3i2.1659
Collins, J. Michael., and Lienhardt, Hallie. “Using Technol-
ogy in financial Coaching.” Center for Financial Security.
Issue Brief 2014‐6.1
Corkery, Michael. “Pitfalls for the Unwary Borrower Out
on the Frontiers of Banking.” September 13, 2015. https://
www.nytimes.com/2015/09/14/business/dealbook/pit-
falls-for-the-unwary-borrower-out-on-the-frontiers-of-
banking.html?mcubz=0
Computer Services, Inc. “Executive Report: 2016 Con-
sumer Survey Report.” (n.d.).
Cooke, Kristy. “Should banks care about millennials?”
MAPA. February 3, 2017. Accessed online: https://www.
maparesearch.com/banks-care-millennials/
Davis, Katy., Piyush Tantia. “A Behavioral Perspective on
Digital Engagement.” Ideas42. July 13, 2017.
Dahl, Drew., and Michelle Franke. “Banking Deserts Be-
come a Concern as Branches Dry Up.” St. Louis Fed. The
Regional Economist. Second Quarter 2017.
De Blasio, Bill., and Julie Menin. “New York City Mobile
Services Study: Research Brief.” New York City Depart-
ment of Consumer Affairs. November 2015.
Demirgüc-Kunt., Asli., and Leora Klapper, Dorothe Singer,
and Peter Van Oudheusden. “The Global Findex Database
2014 – Measuring Financial Inclusion around the World.”
World Bank Policy Research Working Paper 7255. World
Bank Group. April 2015.
Demirgüç-Kunt., Asli., and Leora Klapper. “Measuring
Financial Inclusion in Use of Financial Services across
and within Countries.” Brookings Papers on Economic
Activity. Spring 2013.
Despard, Mathieu., and Terri Friedline. “Do metropolitan
areas have equal access to banking? A
geographic investigation of financial services availability.”
Lawrence, KS: University of Kansas,
Center on Assets, Education, & Inclusion (AEDI). 2017.
Despard, Mathieu R., et al. “Effects of a Tax-Time Savings
Intervention on Use of Alternative Financial Services
among Lower-Income Households.” The Journal of Con-
sumer Affairs. 2016.
Dorrance, Jess., and Lucy Gorham. “Evaluation of the
Financial Solutions Lab: Fintech Innovation Challenge
2015.” UNC Center for Community Capital. October 2016.
Duffy, Jill., “The Best Mobile Finance Apps of 2017.” De-
cember 28, 2016. Accessed online: http://uk.pcmag
.com/apps/8424/guide/the-best-mobile-finance-apps-
of-2017
REFERENCES
UNC Center for Community Capital
Ergungor, Ozgur E. “Bank Branch Presence and Access
to Credit in Low- to Moderate-Income Neighborhoods.”
Journal of Money, Credit, and Banking, vol. 42, No. 7.
October 2010.
Ernst & Young. “Who Will Disrupt the Disruptors.” The
Journal of Financial Perspectives. Winter 2015.
__“UK FinTech on the Cutting Edge – An Eval-
uation of the International FinTech Sector.” February 24,
2016.
__“EY FinTech Adoption Index 2017.” 2017.
Ezrati, Milton. “Fintech Regulation.” Vested Blog Post.
March 7, 2017. Accessed online: https://fullyvested.com /
fintech-regulation/
Falvey, Ryan., Asad Ramzanali, Sohrab Kohli, and Eva
Wolkowitz. “FinLab Snapshot: Solutions to Manage
Household Cash Flow.” CFSI. September 22, 2015.
Federal Deposit Insurance Corporation. “2011 FDIC Sur-
vey of Banks’ Efforts to Serve the Unbanked and Under-
banked.” FDIC. December 2012.
___“Mobile Banking and Payments: New Uses
for Phones...and Even Watches.” 2015. Accessed online:
https://www.fdic.gov/consumers/consumer/news/cn-
sum15/mobilebanking.html
__“National Survey of Unbanked and Under-
banked Households 2015.” FDIC. October 20, 2016.
__Qualitative Research on Mobile Financial
Services for Underserved Consumers – Presentation to
the FDIC Advisory Committee on Economic Inclusion.
October 30, 2015.
FICO. “Millennials Banking Insights and Opportunities.”
Fair Isaac Corporation. 2014.
Financial Finesse. “Gender Gap in Financial Wellness
Report.” 2016.
Federal Reserve. “The U.S. Path to Faster Payments:
Final Report Part One: The Faster Payments Task Force
Approach. January 2017.
Friedline, Terri., Mathieu Despard, and Stacia West. “Nav-
igating day-to-day finances: A geographic Investigation
of brick-and-mortar financial services and households’
financial health.” Lawrence, KS: University of Kansas,
Center on Assets, Education, & Inclusion (AEDI). 2017.
__“Investing in the Future: A geographic In-
vestigation of brick-and-mortar financial services and
households’ financial health.” Lawrence, KS: University of
Kansas, Center on Assets, Education, & Inclusion (AEDI),
February 1, 2017.
Friedline, Terri., and Mathieu Despard. “Life in a Banking
Desert.” The Atlantic Magazine. March 13, 2016. Ac-
cessed online: https://www.theatlantic.com/business/
archive/2016/03/banking-desert-ny-fed/473436/
Gallup. “Nearly Two-Thirds of Americans Prefer Saving
to Spending.” April 25, 2106. Accessed online: http://
www.gallup.com/poll/190952/nearly-two-thirds-ameri-
cans-prefer-saving-spending.aspx
Garon, Thea., Sohrab Kohli. “TechCrunch: Leveraging
Technology to Make Credit Credible.” TechCrunch.
November 6, 2015. Accessed online: https://techcrunch.
com/2015/11/06/three-ways-tech-can-disrupt-the-small-
dollar-credit-industry/
Grameen Foundation. “Research on Women and Usability
of Mobile Financial Services in India.” February 2014.
Gryszkiewicz, Lidia., Tuukka Toivonen, and Ioanna
Lykourentzou. “Innovation Labs: 10 Defining Features.”
Stanford Social Innovation Review. November 3, 2016.
Accessed online: https://ssir.org/articles/entry/innovation
_labs_10_defining_features
Gutman, Aliza., Thea Garon, Jeanne Hogarth, and Rachel
Schneider. “Understanding and Improving Consumer
Financial Health in America.” CFSI. 2015.
Horrigan B. John., and Maeve Duggan. “Home Broadband
2015: The share of Americans with broadband at home
has plateaued, and more rely only on their smartphones
for online access.” Pew Research Center. December 21,
2015.
REFERENCES
67
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the Underserved
Ideas42. “How behavioral insights can help credit unions
better serve members.” November 2016.
Javelin. “Solving the Digital Banking Mystery: Targeting
the Right Customers.” September 2015.
J.D. Power. U.S. Retail Banking Satisfaction Study. 2017.
KPMG and CB Insights. “The Pulse of Fintech, Q2 2016.”
2016.
LaMagna, Maria. “10 million U.S. families do not use a
bank – here’s what it costs them.” MarketWatch. Septem-
ber 23, 2016. Accessed online: http://www.marketwatch.
com/story/10-million-us-families-dont-use-a-bank-heres-
what-it-costs-them-2016-09-23
LaMagna, Maria. “Amazon’s next customer. Americans
who do not have a bank account.” MarketWatch. April 27,
2017. Accessed online: http://www.marketwatch.com/sto-
ry/amazons-next-customer-americans-who-dont-have-a-
bank-account-2017-04-04
LaMagna, Maria. “This entrepreneur is accepting do-
nations – for an app that helps prevent overdrafts.”
MarketWatch. May 2, 2017. Accessed online: http://
www.marketwatch.com/story/this-entrepreneur-is-ac-
cepting-donations-for-an-app-that-helps-prevent-over-
drafts-2017-05-01
LaMagna, Maria. “The people who would benefit most
from free checking can’t find it.” MarketWatch. June 20,
2017. Accessed online: http://www.marketwatch.com/sto-
ry/the-people-who-would-benefit-most-from-free-check-
ing-cant-find-it-2017-06-20
Lenhart, Amanda., et al. “Teens, Social Media & Technolo-
gy Overview 2015.” Pew Research Center. April 9, 2015.
Lienhardt, Hallie. “Financial Coaching Census 2016: A
Progressive Field of Practice.” Asset Funders Network
and Center for Financial Security. 2016.
Los Angeles Times. “Many See Lottery as a Better Bet
Than Saving and Investing.” October 29, 1999. Access
online: http://articles.latimes.com/1999/oct/29/business/
fi-27451
Lienhardt, Hallie. Financial Coaching Census 2016: A
progressing field of practice. Asset Funders Network and
Center for Financial Security. 2016.
Malik, Raina. “Using Chat Bots in the Banking Industry:
12 Opportunities and Challenges for 2017.” Y Insights.
December 2, 2016.
Maarec, Adam D., “Regulators and Innovation – an
Update on Key Development.” November 21, 2016.
Payment Law Advisor. Accessed online: http://www.
paymentlawadvisor.com/2016/11/21/regulators-and-inno-
vation-an-update-on-key-developments/
Marques, Denise., and Stacey Kest. “The FinTech Project
Final Report On Evaluation Activities and Findings.” Uni-
versity of Miami. January 2017.
McKernan, Signe-Mary., Caroline Ratcliffe, Breno Braga,
and Emma Kalish. “Thriving Residents Thriving Cites:
Family Economic Security Matters for Cities.” Urban
Institute. April 2016.
Mercator Advisory Group, Inc. “Mobile Account Opening:
Solving the Convenience-Risk Conundrum.” April 2016.
Merrill Edge. “Merrill Edge Report.” Bank of America Cor-
poration. May 19, 2017.
Morgan, Donald., Maxim Pinkovskiy, and Bryan Yang.
“Banking Deserts, Branch Closings, and Soft Informa-
tion.” Liberty Street Economics, Federal Reserve Bank of
New York. March 7, 2016. Accessed online: http
://libertystreeteconomics.newyorkfed.org/2016/03/bank-
ing-deserts-branch-closings-and-soft-information.html
Mount, Ian. “Your Neighborhood Is About to Have Its
Uber Moment’.” Fortune. March 31, 2016. Accessed online:
http://fortune.com/2016/03/31/citi-bank-staffing-uber-
moment/
National Federation of Community Development Credit
Unions. “From Distrust to Inclusion: Insights into the
Financial Lives of Very Low-Income Consumers.” January
2015.
REFERENCES
UNC Center for Community Capital
Next Billion. “Unlocking Empowerment for Poor Cus-
tomers: Three Tips for Financial Service Providers.” June
7, 2016. Accessed online: https://nextbillion.net/unlock-
ing-empowerment-for-poor-customers-three-tips-for-fi-
nancial-services-providers/
Nguyen, Hoai-Luu Q. “Do Bank Branches Still Matter?
The Effect of Closings on Local Economic Outcomes.”
October 2015.
Noto, Grace. “Will Zelle’s Launch Push P2P to ‘Main-
stream’?” Bank Innovation. June 14, 2017.
Office of the Comptroller of the Currency. “Supporting
Responsible Innovation in the Federal Banking System:
An OCC Perspective.” March 2016.
OpenMarket. “Data Shows Millennials Are Obsessed with
Mobile Banking.” October 27, 2016. Accessed online:
https://www.openmarket.com/blog/data-shows-millenni-
als-are-obsessed-with-mobile-banking/
Perez, Sarah. “Consumers Spend 85% of Time on
Smartphones in Apps, But Only 5 Apps See Heavy Use.”
TechCrunch. June 22, 2015. Accessed online: https://
techcrunch.com/2015/06/22/consumers-spend-85-of-
time-on-smartphones-in-apps-but-only-5-apps-see-
heavy-use/
Pew Research Center. “Internet/Broadband Fact Sheet.”
January 12, 2017. Accessed online: http://www .pewinter-
net.org/fact-sheet/internet-broadband/
Pew Research Center. “Mobile Fact Sheet.” January 12,
2017. Accessed online: http://www.pewinternet.org/fact-
sheet/mobile/
PLAID. “Financial data access methods: Creating a bal-
anced approach.” October 2016.
PwC. “Blurred lines: How Fintech is shaping Financial
Services.” March 2016
Radcliffe, Dan., and Rodger Voorhies. “A Digital Pathway
to Financial Inclusion.” Bill and Melinda Gates Founda-
tion. December 11, 2012.
Ramzanali, Asad., and Katherine J. Flocken. “Innovations
in Helping Consumers Weather Financial Shocks.” CFSI.
September 13, 2016.
Rengert, Krisopher M., and Sherrie L.W. Rhine. “Bank
Efforts to Serve Unbanked and Underbanked Consumers:
Qualitative Research.” May 25, 2016. www.economicinclu-
sion.gov
Ries, Eric. The Lean Startup: How Today’s Entrepreneurs
Use Continuous Innovation to Create Radically Successful
Businesses. Crown Publishing Group. 2011.
Saul, Benjamin., Matthew Bornfreund, and Joshua Garcia.
“Translating the success of UK FinTech measures to the
US.” (n.d.).
Schmall, Theresa., and Eva Wolkowitz. “2016 Financially
Underserved Market Size Study.” CFSI. November 2016.
Schueffel, Patrick. “Taming the Beast: A Scientific Defini-
tion of Fintech.” December 2016. Accessed online:
https://www.researchgate.net/publication/314437464_
Taming_the_Beast_A_Scientific_Definition_of_Fintech
Servon, Lisa. “The Unbanking of America: How the New
Middle Class Survives.” American Prospect Magazine.
Winter 2017.
Simon, Dan. “Millennial Money Study.” Vested. June 20,
2017.
Sledge, Joshua., and Kate Griffin. “Matchmaker, Match-
maker: How FinTechs and Nonprofits Can Swipe Into
Great Partnerships.” CFSI Blog Post. November 10,
2016. Accessed online: http://finlab.cfsinnovation.com/
insights/11-2016/matchmaker-matchmaker-how-fin-
techs-and-nonprofits-can-swipe-into-great-partnerships/
Smith, Aaron. “Record shares of Americans now own
smartphones, have home broadband.” Factank. January
12, 2017. Accessed online: http://www.pewresearch.org/
fact-tank/2017/01/12/evolution-of-technology/
Smith, Aaron., and Dana Page. “U.S. Smartphones Use in
2015.” Pew Research Center. April 1, 2015.
REFERENCES
69
UNC Center for Community Capital
Cataylzing Inclusion: Financial Technology & the UnderservedREFERENCES
Susan, Cohen. “What Do Accelerators Do? Insights from
Incubators and angels.” Innovations: Technology, Gover-
nance, Globalization. vol. 8, no. 3-4, 2014.
The Cities for Financial Empowerment Fund. The Profes-
sionalizing Field of Financial Counseling and Coaching: A
Journal of Essays from Expert Perspectives in the Field.
(n.d.).
The Pew Charitable Trusts. “The Role of Emergen-
cy Savings in Family Financial Security.” January
7, 2016. Accessed online: http://www.pewtrusts.
org/en/research-and-analysis/collections/2015/10/
the-role-of-emergency-savings-in-family-financial-secu-
rity
The New York Times. “Ranking the Top Fintech Com-
panies.” April 6, 2016. Accessed online: https://www.ny-
times.com/interactive/2016/04/07/business/dealbook/
The-Fintech-Power-Grab.html?_r=0
Ulankiewicz, Greg., “Grappling with Mobile Banking En-
gagement Issues.” Raddon. August 17, 2017.
United States Consumer Financial Protection Bureau.
“Project Catalyst report: Promoting Consumer-Friendly
Innovation – Innovation Insights.” October 2016.
__“Financial Well-Being: The Goal of Financial
Education.” January 2015.
__“Mobile Financial Services: A summary of
comments from the public on opportunities, challenges,
and risks for the underserved.” November 2015.
__“Empowering Low Income and Economically
Vulnerable Consumers: Report on a National Convening.”
November 2013.
United States Department of Commerce, International
Trade Administration. 2016 Top Markets Report: Financial
Technology. 2016.
United States Government Accountability Office. “Finan-
cial Technology: Information on Subsectors and Regula-
tory Oversight.” GAO. April 2017.
Walker, Rob. “How to Trick People Into Saving Money.”
The Atlantic. May 2017. Access online: https://www.
theatlantic.com/magazine/archive/2017/05/how-to-trick-
people-into-saving-money/521421/
World Economic Forum. “The Future of Financial Ser-
vices: How disruptive innovations are reshaping the way
financial services are structured, provisioned and con-
sumed.” June 2015.
YouGov. “Cashing In: USA How to increase your cashless
customers base.” (n.d.).